BlackRock, the world’s largest asset manager with approximately $11.5 trillion under management, has announced its withdrawal from the Net Zero Asset Managers Initiative (NZAMI), which was created in 2020 and boosted by a 2021 United Nations climate conference. BlackRock follows similar moves by other firms like Vanguard Group.
This decision follows a trend of Wall Street firms distancing themselves from environmentally focused investor groups amidst mounting pressure from Republican politicians. Over the last few years, Wall Street’s involvement in climate initiatives was regularly met with criticisms from Republican politicians – criticisms bolstered by a little-known group called Consumers Research. The Washington Post, in an article published two years ago (January 30, 2023), described it as “a key player in the conservative crusade to prevent Wall Street from factoring climate change into its investment decisions.”
If you visit the Consumers Research home page, you will be met by a stunning mix of contradictory signals: On one hand, it describes itself as “America’s oldest consumer protection agency, established in 1929,” which suggests a dedication to defending the average citizen; on the other hand, it invites you to sign up for “woke alerts”, saying that “Many corporations are putting progressive activists and their dangerous agendas ahead of customers. They’ll only succeed if we look the other way… “ Since when do “progressive activists” have a “dangerous agenda”? Dangerous for whom? Rich people’s income? Clearly so, since this little-known agency was suddenly lavishly funded by millions of dollars from undisclosed donations.
According to Consumer’s Research anti-ESG tracker, so far, 32 states in the United States have taken action, passing (or debating) bills:
So now, with Trump’s November victory, the criticisms have turned into howls against so-called “woke capitalism.”
Judiciary Committee Chairman Jim Jordan hailed BlackRock’s departure as a “huge win for freedom and American prosperity,” urging all U.S. financial institutions to follow suit and abandon what he termed the “climate cartel and woke ESG policies.” ESG refers to the consideration of environmental, social, and governance factors in investment decisions.
Far from a “huge win” this is going to be a “huge loss” for America on multiple levels:
- It signals to the world that America is a petro-state ignoring the adverse impacts of the fossil fuel industrial model on the global climate and environment (the E in ESG);
- It shows that America no longer supports human rights and social justice (the “S”);
- It confirms that America gives free rein to corruption (the “G”).
So much for “freedom and American prosperity. Once fossil fuels are greenlighted, watch the acceleration of extreme weather events in the U.S., like the wildfires Los Angeles is currently suffering or the recurrent flooding in Florida, not to mention water pollution resulting from fracking and stronger hurricanes. As to human rights and corruption, expect a free-for-all. And this will last for at least the next four years, as long as Trump is at the helm.
Why BlackRock joined NZAMI and why it now left
BlackRock’s initial rationale for joining NZAMI stemmed from the fact that two-thirds of its global clients are committed to achieving net-zero emissions. However, the firm now states that its membership in such organizations has led to confusion about its practices and subjected it to legal inquiries from various public officials.
In November BlackRock and rivals were sued by Texas and 10 other Republican-led states that claimed their activism cut coal production and boosted energy prices. And in December the Republican-led U.S. House of Representatives Judiciary Committee sought information from BlackRock and dozens of other asset managers involved with NZAMI.
BlackRock has denied any wrongdoing, stating that the lawsuit “discourages investments in the companies consumers rely on.”
Despite its departure from NZAMI, BlackRock maintains that this decision will not impact how it develops products and solutions for clients or manages their portfolios. The firm asserts that its active portfolio managers will continue to assess material climate-related risks.
NZAMI, which currently boasts over 325 signatories managing more than $57.5 trillion, requires its members to support the goal of net-zero greenhouse gas emissions by 2050. This support can be demonstrated through various means, such as how members vote their proxies at corporate meetings.
A NZAMI spokesperson via email called any investor withdrawal disappointing. “Climate risk is financial risk. NZAM exists to help investors mitigate these risks and to realise the benefits of the economic transition to net zero,” the spokesperson said.
The Trump Effect is limited: Exodus in America but not in Europe
American firms are not only leaving NZAMI but also alliances like the Net-Zero Banking Alliance (NZBA). The latest big bank leaving it was Morgan Stanley, which confirmed its exit last Thursday following recent departures from Citigroup, Bank of America, Wells Fargo, and Goldman Sachs.
Overall, the “trend” has turned into a Niagara. There are, however, subtle differences, and it is to be noted that while the banking arm of JP Morgan Chase pulled out of NZBA this January, its asset management division announced that it will remain affiliated with NZAMI. This means that J.P. Morgan Asset Management is still committed to net-zero targets.
The recent exodus of major Wall Street firms from climate groups comes ahead of President-elect Donald Trump’s return to office and the Republican Party’s assumption of control in Congress. While these departures may not directly affect lending or share purchases, they signal a shift in American investor priorities away from environmental concerns. The same cannot be said for Europe.
The impact on European finance and impact investing is expected to be different.
In Europe, there is a stronger regulatory framework and a more consistent commitment to environmental, social, and governance (ESG) principles. European financial institutions and investors are generally more aligned with the goals of the Paris Agreement and the European Green Deal. This means that the departure of American firms from climate groups is unlikely to have a direct impact on European finance.
While direct impacts may be minimal, indirect consequences could arise. For example, European firms might see increased investment as global capital flows shift away from American companies that no longer uphold strong ESG standards.
Additionally, European policymakers may strengthen existing climate initiatives or introduce new ones to maintain the momentum toward sustainable finance.
Overall, while the American firms’ decisions signal a shift in priorities, one should expect Europe to continue its strong focus on sustainable finance and impact investing, as the commitment to addressing climate change remains robust across the European Union.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com In the photo: showing the stock price of BlackRock Inc. (BLK), photo taken on Dec. 3, 2022 Source: Alpha Photo Flickr
