The minute
- The SEC announced it will not pursue enforcement action against BlackRock and State Street over their participation in Climate Action 100+ and the 2021 ExxonMobil proxy vote that placed three Engine No. 1 directors on the board.
- The agency found no evidence that BlackRock or State Street agreed to vote proxies in coordinated manners or shared voting intentions with other investors.
- The SEC warned that participation in climate engagement groups could constitute a “group” under Section 13(d) of the Securities Exchange Act, potentially requiring investors to file Schedule 13D instead of the simplified Schedule 13G, with more extensive disclosure obligations.
Why it matters: The SEC did not punish, but it drew a line. By closing the investigation with a public warning rather than an enforcement action, the agency created a chilling effect without establishing legal precedent. Asset managers now face a new calculation: joining climate engagement coalitions may not violate securities law, but it could force them out of the lighter regulatory framework that passive investors rely on. The warning arrives alongside other SEC moves to limit shareholder influence, including proposals targeting proxy advisory firms and a plan to rescind rules that give shareholders a route to include proposals in company proxy statements.
What changes for Brazilian asset managers
Brazil’s securities regulator, the CVM (Comissao de Valores Mobiliarios), operates under a different framework for investor coordination. CVM Instruction 44 (which replaced the former Instruction 358) governs disclosure of significant shareholdings, and CVM Resolution 81 regulates proxy solicitation. Under Brazilian rules, the concept of “acting in concert” (atuacao conjunta) also triggers additional disclosure requirements, but the threshold and practical enforcement differ from the SEC’s Section 13(d) group definition. In Brazil, acting in concert is more explicitly tied to agreements to exercise voting rights or acquire control, while the SEC’s warning extends the concept to participation in engagement coalitions, even without a formal voting agreement. Brazilian asset managers that are signatories to Climate Action 100+ or similar initiatives (such as the PRI collaborative engagement programs) should note that the SEC’s interpretation, if adopted by other regulators, could eventually influence CVM guidance. For now, CVM has not issued comparable warnings about climate engagement coalitions, but the precedent creates uncertainty for Brazilian firms with dual-listed funds or U.S. operations.
Who gains and who loses
The immediate beneficiaries are corporate boards at high-emitting companies. If large passive investors withdraw from climate coalitions to avoid regulatory risk, the coordinated pressure that produced outcomes like the ExxonMobil board shake-up in 2021 becomes harder to replicate. Asset managers themselves face a lose-lose dynamic: staying in coalitions risks regulatory scrutiny, while leaving exposes them to criticism from asset owners who demand climate engagement (the Japanese Government Pension Investment Fund divested $25 billion from BlackRock over climate concerns before BlackRock joined CA100+ in 2020). Climate engagement organizations like CA100+ and Ceres lose leverage even without a formal prohibition. Ceres General Counsel Michael Boudett stated that CA100+ “has always operated within U.S. securities law” and that every participating investor makes independent decisions, but the SEC’s warning creates friction regardless of legal merit.
What remains undecided
The SEC did not establish a binding rule or formal guidance. The warning is a staff statement, not a regulation or enforcement precedent. Several questions remain open: at what point does participation in an engagement coalition cross from information sharing into coordinated action under Section 13(d); whether attending meetings, sharing research, or co-signing letters alone can trigger group formation; and whether Congress or the courts will weigh in on the boundaries. A future SEC with different leadership could reverse this posture entirely, as happened when the current commission reversed its predecessor’s climate disclosure rules. Until formal rulemaking or a court decision clarifies the line, asset managers are operating under ambiguity, which itself functions as a deterrent.
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