The world’s biggest investor climate coalition has suspended its activities, removing its net-zero targets and member obligations.
In a statement published on its website on Monday evening, the Net Zero Asset Managers initiative (NZAM) indicated that growing anti-sustainability sentiment in the US had prompted it to rethink its strategy.
It comes just days after the world’s largest asset manager, BlackRock, ditched the group, telling clients its membership had “caused confusion” in some corners about its investment practices, and triggered legal challenges from Republican politicians in some states.
BlackRock, Vanguard and State Street are all facing allegations that they contributed to rising energy prices for consumers, by pushing coal companies to reduce their emissions. The lawsuit has been filed by 11 US States. The trio denies the accusations.
Pension funds are beginning to get caught up in the backlash too: a federal court recently ruled that American Airlines had breached its fiduciary duty of loyalty to its employees by allowing its pension fund to be run by asset managers that considered ESG.
“An investment strategy assumes an ESG label when it is aimed at, in whole or in part, bringing about certain types of societal change,” said the ruling.
Many of the largest banks in the US have abandoned the Net Zero Banking Alliance, another coalition backed by the United Nations, ahead of the inauguration of Donald Trump as president.
Trump is expected to wage war on sustainable finance and broader environmental efforts during his time in office, including removing the US from its commitment to the Paris Agreement.
NZAM members relieved of any obligations
“Recent developments in the US and different regulatory and client expectations in investors’ respective jurisdictions have led to NZAM launching a review of the initiative to ensure NZAM remains fit for purpose in the new global context,” said the initiative in its statement.
“Signatories will be consulted throughout the review process and informed of any updates in a timely and transparent fashion.”
The group will suspend its governance activities and take a break from upholding the expectations it has for its members while it works out whether it needs to reinvent itself.
Members will not have to report on their progress during this time.
“NZAM will also remove the commitment statement and list of NZAM signatories from its website, as well as their targets and related case studies, pending the outcome of the review.”
Pensioenfonds Detailhandel quits NZAOA
Despite the American Airlines ruling, the Net Zero Asset Owner Alliance (NZAOA) has remained largely untouched by the political pushback in the US so far – chiefly because it only has seven members from the States, of which most are foundations or faith-based organisations.
But last month, Pensioenfonds Detailhandel, the pension scheme for the Dutch retail sector, quit the alliance.
The €30bn fund’s head of responsible investment, Louise Kranenburg, told IPE that it was still “very much committed” to its net zero goals, but couldn’t justify the resources needed to be part of a big coalition.
“It has been an absolute pleasure to work with NZAOA and be inspired by their ambition to achieve real-world outcomes for a sustainable planet,” she said in an email.
“The membership has allowed us to enhance our climate policies and we have achieved significant milestones in the past years […] However, as a small organisation, we need to efficiently use our resources to future-proof our policies, design investment portfolios, and engage collaboratively.
“This means reducing our time and capacity spent on the involvement in NZAOA working groups and its reporting obligations. We have found the membership beneficial and wish NZAOA and its members all the best.”
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