BlackRock Inc. Is parting ways with one of the world’s biggest climate-investor groups after being targeted by Republican politicians for its efforts on global warming.
The money manager has decided to leave the Net Zero Asset Managers initiative, it said in a letter to clients on Thursday. Membership in the group “caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials,” the New York-based firm said.
BlackRock, which oversees more than $11 trillion, has been the subject of attacks from GOP lawmakers for embracing what conservatives call “woke” policies. Most recently, BlackRock was among a group of asset managers singled out in a lawsuit led by Texas alleging breaches of antitrust laws due to the adoption of pro-climate strategies that suppress coal production.
And with President-elect Donald Trump headed for the White House, Wall Street is bracing for more attacks on climate finance.
“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,” Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, said in an emailed comment. And it “won’t be the last financial organization to quit a net zero initiative,” she said.
BlackRock was mentioned, along with firms including State Street Corp. And Vanguard Group Inc., in a report last month from the House Judiciary Committee that said it found “evidence of collusion and anticompetitive behavior” by the financial industry to “impose radical ESG-goals” on U.S. Companies.
Over the past month, a climate coalition for lenders, the Net-Zero Banking Alliance, has seen a mass exodus of US members. Since early December, NZBA lost Goldman Sachs Group Inc., Wells Fargo & Co., Citigroup Inc., Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co.
The moves reflect Wall Street’s desire to shield itself from increasing GOP pressure. And there are signs the strategy is working. Earlier this week, Texas Attorney General Ken Paxton dropped his threat to cut off the lenders from municipal-bond deals after they quit NZBA.
“Our participation in NZAMi didn’t impact the way we managed client portfolios,” BlackRock said in Thursday’s letter, which was signed by Vice Chairman Philipp Hildebrand and Helen Lees-Jones, global head of sustainable and transition solutions. “Therefore, our departure doesn’t change the way we develop products and solutions for clients or how we manage their portfolios.”
BlackRock said it managed more than $1 trillion in sustainable and transition investment strategies as recently as September and “our commitment to helping our clients achieve their investment goals remains unwavering.”
NZAMi is a group of roughly 325 asset managers, overseeing about $50 trillion, that are committed to achieving net zero alignment by 2050. State Street Global Advisors, the world’s third-biggest asset manager, said in an emailed statement on Thursday that it remains a member of NZAMi. Vanguard, the second biggest, left the group in 2022.
In its statement, BlackRock said its fund managers “continue to assess material climate-related risks, alongside other investment risks, in delivering for clients.” About two-thirds of the firm’s largest clients, including all of its biggest customers in Europe, have made net zero commitments, the money manager said.
BlackRock Chief Executive Officer Larry Fink had been a champion of environmental, social and governance strategies, devoting large parts of his annual letters to urging corporate bosses to pay attention to climate change and other societal issues. But then he came under attack from Republicans and some states collectively pulled billions of dollars from BlackRock.
In response, Fink has said he no longer uses the ESG label because it’s become too politicized.
“BlackRock is under political pressure to exit climate groups and from shareholders who are unhappy with the loss of business from state investment funds that object to the agendas of climate groups,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.