The Net Zero Asset Managers initiative (NZAM) has announced it is “suspending activities” following the departure of BlackRock from its list of signatories.
In a statement posted to its website, NZAM said recent developments in the US and different regulatory and client expectations in investors’ respective jurisdictions have led it to launch a review of the initiative to ensure NZAM “remains fit for purpose in the new global context”. As the initiative undergoes this review, it decided to suspend activities to track signatory implementation and reporting.
Signatories will be consulted throughout the review process and informed of any updates in a timely and transparent fashion, NZAM added.
The list of signatories and the commitment statement webpages have been removed from its website pending the outcome of the review, although that information remains accessible through internet archives.
The news follows the exit of all six major US banks from the Net Zero Banking Alliance (NZBA) in recent weeks. Donald Trump’s win in the race to become the next US president has had a “noticeable cooling effect” on major financial institutions’ participation in net-zero initiatives, noted Mark Campanale, founder and director of the Carbon Tracker initiative, last week.
He also described it as “a knee-jerk reaction to political pressure”, and a case of ‘greenhushing’ by departees who are pulling back from ‘public’ commitments but proceeding with their targets anyway.
NZAM members ‘already falling short of climate goals’
Responding to the announcement, Ben Cushing, director for the Sierra Club’s Fossil-Free Finance campaign, said that capitulating to climate denier politicians “undermines asset managers’ fiduciary duty to mitigate the growing risks that climate change poses to investors’ life savings”.
“Too many of NZAM’s members were already falling far short of their voluntary climate goals, so we hope this ‘review process’ leads to the bar being raised, not lowered, for firms to maintain their membership. Industry alliances like NZAM have an important role to play in setting baseline expectations, but ultimately it’s up to financial institutions’ regulators, clients, and shareholders to hold them accountable for addressing climate-driven financial risks.”
Regarding BlackRock‘s exit, Cushing added that, regardless of the political pressures Larry Fink is responding to, the fact remains that climate change “poses one of the greatest risks to our global economy and the long-term investments BlackRock’s clients rely on”.
“Membership in voluntary alliances sets an important baseline, but to fulfill its fiduciary duty to long-term investors, BlackRock must support real-world decarbonisation through stronger shareholder voting and by directing capital toward industries that mitigate systemic climate risks. If BlackRock won’t do that, its clients should find a different asset manager that will.”
Lewis Johnston, director of policy at ShareAction, commented: “As deadly wildfires rage on in Los Angeles, the threat of climate change and the extreme weather it can bring has never been more clear. Climate risk is financial risk, and any approach to responsible investment must address the ongoing climate crisis.
“Collaboration is critical for addressing this global challenge, and whilst voluntary initiatives have limitations, they can play an important role in sharing best practice and encouraging commitments. The announcement that NZAM is suspending operations is a backwards step.”
“Alongside this we need regulators to set ambitious policies to raise standards and ensure that the financial sector is playing its part in driving the transition to net zero economies that the world needs.”
‘No surprise’ BlackRock left NZAM
In a letter to its clients obtained by Bloomberg last week, BlackRock stated its NZAM membership “caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials”.
NZAM responded, saying that, though it was disappointed to see any investor withdraw, as a voluntary initiative, it respected any individual decisions signatories take.
“NZAM exists to help investors mitigate these risks and to realise the benefits of the economic transition to net zero,” it added. “NZAM has successfully supported investors globally as they have sought to navigate their own individual paths in the energy transition in line with their fiduciary duties and clients’ long-term financial objectives. NZAM looks forward to continuing to play this constructive role with investors around the world.”
Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, added: “The news that BlackRock is exiting the NZAM initiative should come as no surprise to anyone. BlackRock has hung in there as long as it could, but the pressure has become too great, and the reputational and legal risks too high, just before Trump takes office.
“BlackRock was not the first and will not be the last financial organisation to quit a net-zero initiative. This is another setback for NZAM and the broader Glasgow Financial Alliance for Net Zero, but what matters more is BlackRock’s real commitment to pushing the decarbonisation and transition financing agenda.
“The firm will have some convincing to do in Europe, where, in general, investors care more about asset managers’ climate commitments than in the US.”
PA Future has contacted BlackRock for comment.
