US asset managers are bracing for further political challenges in relation to the increase in environmental, social and governance (ESG) policies. According to industry experts, their membership of groups that support their efforts to minimize climate-related risks in portfolios managed on behalf of clients is considered unlikely to contravene the country’s anti-trust laws.
Speaking in October on a Ropes & Gray podcast, Chong Park, litigation & enforcement partner, said, "challenges to coordination by investors and other institutions on anti-trust grounds don’t appear to hold any water." ESG Investor also published a story highlighting these challenges and sharing insights from Chong.
A so-called ‘group boycott’ under Section 1 of the Sherman Act, committed by a collaborative investor-led ESG initiative, can only be considered to be breaking anti-trust laws if members are agreeing to not deal with a third party (like a US oil and gas major) as a means of harming a rival.
“Even if those investment firms were boycotting energy firms that don’t follow ESG practices, these investment firms aren’t competitors to those oil and gas companies,” he said. “They don’t benefit from directly harming non-ESG companies, so whatever ‘boycott’ there is, it’s not about boycotting to gain a competitive advantage.” He noted that commitments made by members of CA100+ are also “explicitly not binding firms to any particular investment choices.”
“Further, the majority of these investment managers are still invested in carbon-intensive firms through both transition/impact and non-ESG funds, either to maintain financial returns or support and accelerate the transition to net zero,” Chong said.
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