Following recent news that major financial institutions had ended or scaled back their involvement in Climate Action 100+, some Republican members of Congress claimed “a big victory against the woke takeover of American financial organizations.” According to Rep. Thomas Massie (R-Ky.), it was his and Rep. Jim Jordan’s (R-Ohio) saber-rattling over “potential violations of antitrust law,” that had JPMorgan, StateStreet, Blackrock, and PIMCO distancing themselves from a voluntary initiative to reduce corporate greenhouse gas emissions.
This bombast surrounding a two-year anti-ESG campaign is superficial — dramatizing political risks and successes which bear little resemblance to the actual risks of antitrust investigations. As Roger Zelazny, author of “Lord of Light,” wrote: “No word matters. But man forgets reality and remembers words.” Here, storytelling grounded in culture wars is dominating the debate over climate alliances, and the wrong risks are being foregrounded. Instead of focusing on the private sector’s important role in mitigating the climate crisis, defecting financial institutions point to the legal and political risks of affiliations with climate efforts. So it’s worth taking some time here to put those concerns to rest.
The argument that investors coordinating on climate policy constitutes an antitrust violation has rhetorical flourish when phrases like ‘climate cartels’ or ‘group boycotts against the fossil fuel industry’ are invoked. But it maintains little legal merit. Financial institution climate alliances are built around shared commitments to individualized emissions reductions, a far cry from cartel behavior or price fixing. Voluntary industry standards and associations have long been permissible under antitrust law.
A group boycott has precise legal meaning, requiring collusion by two or more competitors to keep a current or potential competitor from a market. Financial institutions do not compete with the companies they finance, and industry alliances would need to have anti-competitive effects to be challengeable — no such harms are apparent here. It is notable that despite subpoena letters and investigations, no related antitrust cases have been filed.
Regulators in other jurisdictions have taken action to remove antitrust as a convenient excuse by firms to not keep their climate commitments. Agencies in the EU, UK, Japan, and the Netherlands have gone to great lengths to ensure that legitimate collaborations — that do not impact competition parameters like price, market allocation, or the sharing of competitively sensitive information — have wide latitude under antitrust law. They have also established an open door policy for firms to raise questions.
However, U.S. antitrust enforcers at both the Justice Department and FTC have not engaged on climate collaborations due to perceived political risks. Not wanting to fracture the bipartisan antitrust movement reinvigorating enforcement in sectors like big tech, agriculture, and health care, climate is seen as beyond their remit — a political hot potato, to be dealt with by other agencies. Simultaneously, the agencies are contending with continued bad-faith efforts to undermine their rulemaking and enforcement authority.
U.S. antitrust enforcers have rightly stated that antitrust makes no special accommodation for climate or environmental considerations. “We have a 130-year-old first antitrust law, and a Clayton Act that’s about 110 years old, and nowhere in that statute are we permitted to take into account non-economic considerations.” said Doha Mekki, Principal Deputy Assistant Attorney General of the DOJ, in a recent New York Times interview. Still, agencies could quell much of this debate if they clarified that the majority of investor climate collaborations on standard setting, industry benchmarking, and shareholder engagement activities, do not raise significant antitrust issues.
And what about the actual risk for firms accused of antitrust violations? Any suit against financial institutions participating in climate alliances would likely be a ‘rule of reason’ case, meaning the harms and benefits of any such collaboration would be balanced against each other (rather than deemed outright illegal). These cases are notoriously difficult to win, and involve lengthy fact-finding processes with complex economic analyses of firm behavior. Moreover, the impact of any potential financial penalties for large financial institutions would be negligible.
Perhaps, then, the firms defecting from CA100+ want to avoid a partisan fight over climate change. They may perceive greater reputational risk now to being involved in such alliances — including the potential cost and visibility of political investigations.
Here again, narrative has trumped reality. While there are legitimate criticisms of “ESG” investing and, importantly, the concentrated power of financial firms, the broader anti-ESG campaign is largely driven by fossil fuel industry groups and climate denial think tanks. Their unfortunate goal is to protect oil and gas companies from widening public disapproval and regulatory scrutiny as the societal harms of the industry continue to grow.
Ultimately, while regulators, politicians, and firms all focus on reducing their own risks, the risks of climate change remain neglected. The immense toll of global warming will include drought, wildfires, biodiversity loss, entire countries rendered uninhabitable. Studies estimate the economic costs of climate change could reach $178 trillion over the next 50 years, or an 18 percent decrease in global GDP in the next 30 years. The debate whether certain financial institutions — themselves significant investors in fossil fuels — are permitted to share information about emissions reduction pledges may soon seem banal compared to the manifest risks of climate change.
The authors co-lead theAntitrust & Sustainability Project at Columbia University’s Climate Law & Finance Initiative. Hanawalt is the Director of Climate Finance and Regulation at theSabin Center for Climate Change Law. Ms. Hearn is a Resident Senior Fellow at theColumbia Center on Sustainable Investment and co-author of The Myth of Capitalism: Monopolies and the Death of Competition.