SEC drops investigation into BlackRock, State Street, with a warning over participation in climate groups

illuminem summarises for you the essential news of the day, reviewed by our editorial team. Read the full piece on ESG Today or enjoy below:

🗞️ Driving the news: The US Securities and Exchange Commission (SEC) has closed its investigation into BlackRock and State Street over their participation in Climate Action 100+ (CA100+), an investor initiative focused on reducing emissions from major corporate greenhouse gas emitters
• Although the agency will not pursue enforcement action, it warned that coordinated shareholder engagement could trigger additional regulatory and disclosure obligations for asset managers

🔭 The context: The investigation examined whether BlackRock, State Street and other investors coordinated their voting during ExxonMobil’s 2021 shareholder battle, which resulted in three board seats going to nominees backed by activist investor Engine No. 1
• The SEC said it found discussions concerning proxy voting but did not establish that BlackRock or State Street had agreed how to vote or shared their voting intentions with other investors
• The agency cautioned that participation in investor coalitions could lead to members being treated as a group under securities law
• Depending on the circumstances, this could require disclosure of combined holdings exceeding 5% and affect eligibility to use simplified reporting procedures.

🌍 Why it matters for the planet: Climate-focused investor engagement can encourage high-emitting companies to improve emissions disclosures, governance and transition strategies
• Greater regulatory uncertainty around collaboration could make investors more cautious about collective climate initiatives, potentially weakening pressure for corporate decarbonisation

⏭️ What’s next: Asset managers would need to assess how they participate in collaborative engagement groups and document their independent voting decisions
• The SEC’s warning could influence how investors structure future climate initiatives and engage with companies on environmental risks

💬 One quote: “Climate Action 100+ has always operated within U.S. securities law,” said Michael Boudett, general counsel at Ceres, adding that participating investors make their own decisions, including how they vote their shares

📈 One stat: 5% — the shareholding threshold highlighted by the SEC at which coordinated investors could face additional disclosure obligations if treated as a group under Section 13(d) of the Securities Exchange Act.

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