The Net Zero Asset Managers initiative (NZAM) is set to lose about US$11.5 trillion of financial influence after BlackRock exited the climate collective last week amid growing political pressure in the US.
Founded in 2020, NZAM counts 325 fund manager signatories, representing about US$57.5 trillion of assets that will shrink by 20 per cent as BlackRock signs out.
NZAM signatories commit to supporting the “goal of net zero greenhouse gas emissions by 2050 or sooner”, according to the group’s website.
BlackRock told clients in a letter that its “memberships in some of these organizations have caused confusion regarding” its practices while also opening the firm up “to legal inquiries from various public officials”.
In addition to losing several US state government fund mandates the world’s largest investment manager was named – along with Vanguard and State Street – in a legal action last month spearheaded by Texas alleging collusion
Texan Attorney General Ken Paxton said at the time: “Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices.”
Coincidentally, the Lone Star state and BlackRock also featured in a legal decision set to chill environmental, social and governance (ESG) advocates in the US after a Texas court ruled American Airlines was in breach of fiduciary duty to its employees who invested in the group’s 401k retirement savings plans. In a ruling handed down last week, US District Judge Reed O’Connor found the airline failed to act in the best interests of its 401k members by investing in ESG-skewed BlackRock funds.
“The facts here compellingly established fiduciary misconduct in the form of conflicts of interest and the failure to loyally act solely in the Plan’s best financial interests,” O’Connor concluded. “BlackRock’s ESG influence is evident throughout administration of the Plan. The belief that ESG considerations confer a license to ignore pecuniary benefits is mistaken. [The US employer retirement savings law] does not permit a fiduciary to pursue a non-pecuniary interest no matter how noble it might view the aim.”
Meanwhile, despite clocking out of NZAM, BlackRock says in the letter – signed by vice-chair Philipp Hildebrand and global head of sustainable and transition solutions, Helen Lees-Jones – that the move “does not change the way we develop products and solutions for clients or how we manage their portfolios”.
“BlackRock’s active portfolio managers continue to assess material climate-related risks, alongside other investment risks, in delivering for clients.”
Vanguard, the second-largest global fund manager, left NZAM in 2022 citing a conflict between its predominately passive investment style and the goals of the initiative.
Adopting a line that BlackRock almost copied-and-pasted three years later, Vanguard said in a note at the time that such industry lobby groups “sometimes… can also result in confusion about the views of individual investment firms”.
However, State Street – third in the global asset manager size rankings – told media it remained a NZAM member.
A similar climate collective for the banking sector has also seen a flurry of US-based member resignations ahead of the looming regime change to the second Trump administration.
Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo have all quit the Net-Zero Banking Alliance (NZBA) since December.
Formed under a United Nations banner in 2021, the NZBA currently lists 141 members spread across 44 countries with a combined US$61 trillion of assets.