BlackRock has withdrawn from the Net Zero Asset Managers (NZAM) initiative, prompting fears that more US investors will follow.
IPE reported on Thursday that the asset manager was rumoured to be planning a departure from the UN-backed coalition this week, amid legal challenges from anti-ESG Republicans in the US.
BlackRock now appears to have confirmed its departure, telling clients yesterday that its involvement in some climate coalitions had “caused confusion” about its investment practices, “and subjected us to legal inquiries from various public officials”.
The letter, written by BlackRock’s vice chair, Philipp Hildebrand, was circulated by email.
Texas, Alabama and West Virginia are among 11 states to have filed a lawsuit against BlackRock in the Texan courts, alleging its support for decarbonisation efforts had flouted competition rules in the US.
“For the past four years, America’s coal producers have been responding not to the price signals of the free market, but to the commands of Larry Fink, BlackRock’s chairman and CEO, and his fellow asset managers,” the lawsuit, filed in November, said.
Vanguard and State Street are also included in the accusations. All three deny the claims.
The Texan attorney general said in a statement at the time: “Blackrock, Vanguard, and State Street utilised the Climate Action 100+ and the Net Zero Asset Managers Initiative to signal their mutual intent to reduce the output of thermal coal, which predictably increased the cost of electricity for Americans across the United States.”
BlackRock withdrew its US arm from CA100+ last year, but there is currently no suggestion that its UK-based business, BlackRock International, will leave.
Global asset managers are getting caught up in the growing divergence in the views of US politicians and voters, and European asset owners.
Incoming US president Donald Trump is expected to clamp down even further on financial institutions that seek support a transition to an economy that isn’t reliant on fossil fuels.
Meanwhile, a large number of European pension funds and insurers that run their money via BlackRock have committed not to invest in the development of new oil and gas projects in Europe and North America.
IPE reported yesterday on BlackRock’s efforts to distance itself from the idea that it seeks to influence company strategy when it comes to net zero. It said its job was simply to provide asset management services to clients, who have different climate ambitions.
There are concerns that BlackRock’s decision to leave NZAM marks the start of an investor-led exodus similar to that seen recently in the banking sector. Morgan Stanley, Citi and JP Morgan are among a raft of entities to have quit the Net Zero Banking Alliance ahead of Trump’s inauguration this month.
One London-based investor described BlackRock as “the first domino to fall”.
“We all know what happens now,” he said. “We’re all just braced for all the others to follow, now that the door is open.”
A spokesperson for NZAM said: “We are disappointed to see any investor withdraw, but as a voluntary initiative, we respect any individual decisions signatories take.”
“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.”
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