The U.S. Securities and Exchange Commission on Wednesday closed its probe into BlackRock and State Street over their participation in Climate Action 100+, finding no evidence the asset managers agreed to coordinate proxy votes in a 2021 ExxonMobil board contest.

The agency, however, warned that large passive investors that join coordinated climate and corporate engagement initiatives could lose Schedule 13G status and face Section 13(d) group disclosure obligations once their combined holdings cross 5% of a company's shares.

What did the SEC actually investigate?

The probe examined whether BlackRock, State Street and other Climate Action 100+ (CA100+) members used the 2017-launched investor coalition as a vehicle to coordinate votes during the 2021 ExxonMobil proxy contest. That contest ended with Engine No. 1 and its CA100+ backers winning three board seats at the oil major.

The SEC said its investigation "did not develop evidence that BlackRock or State Street agreed to vote proxies in certain manners or shared their proxy voting intentions with investors." The agency did find that the firms held discussions with Ceres, the investor group supporting CA100+, about their ExxonMobil voting.

Why did BlackRock and State Street join CA100+?

Both firms signed on in 2020 after the Japanese Government Pension Investment Fund pulled a $25 billion mandate from BlackRock over climate-related concerns. Each firm moved to document its voting independence at the time, with BlackRock signing a statement declaring it held sole discretion over shareholder proposal support.

State Street made similar efforts to record its independence. The SEC noted the firms had initially hesitated to join CA100+ before facing pressure from asset owners and media.

What changes for asset managers now?

The SEC's warning frames CA100+-style participation as a potential Section 13(d) "group" risk. Under that framework, coordinated investors crossing the 5% beneficial ownership threshold must disclose combined holdings, intentions and activities on the more demanding Schedule 13D rather than the simpler Schedule 13G available to passive investors.

That reclassification carries operational cost and disclosure exposure. It sits inside a broader SEC posture that includes moves against proxy advisory firms and a proposal to rescind the framework that lets shareholders place proposals in company proxy statements.

How does this reach circular economy capital?

Climate engagement coalitions are a primary channel through which large asset managers pressure emitters and resource-intensive sectors on transition strategy. That agenda now explicitly includes circular economy targets, recycled-content commitments and Scope 3 reporting.

A reclassification of coordinated engagement as a "group" raises the cost of those campaigns. It may push capital toward listed issuers that publish transition and circularity plans with verifiable, auditable targets, and away from coalition-led engagement on hard-to-abate sectors.

What milestones decide what happens next?

The SEC's proxy adviser rulemaking and the pending proposal to eliminate the shareholder proxy proposal framework are the near-term decisions. They will determine whether coordinated engagement can survive at scale. Asset managers, including BlackRock and State Street, are expected to file responses before those comment periods close.

Michael Boudett, General Counsel at Ceres, pushed back on the SEC framing. "Climate Action 100+ has always operated within U.S. securities law," Boudett said.

He added: "It supports investors as they assess and address the financial risks that climate poses to the companies they invest in. It is up to every participating Climate Action 100+ investor to make their own decisions, including how they vote their shares."