A global coalition of asset managers set up to meet net-zero goals has suspended its operations after the departure of its largest member, BlackRock Inc., in the latest retreat from concerted climate action in the finance sector.
The Net Zero Asset Managers Initiative, or NZAMI, said on Monday it launched a review to determine whether the group “remains fit for purpose in the new global context.” That context is marked by pushback against corporate environmental, social and governance programs that has intensified with the political shift to the right, especially in the United States, along with antitrust concerns.
The group, which has more than 325 signatories with a total of US$57.5-trillion of assets under management, will halt its activities while it tracks climate-related implementation and reporting among its remaining members. It also removed its commitment statement and list of signatories from its website, it said in an unsigned statement.
Last week, BlackRock, the world’s largest asset manager, said it was leaving the NZAMI because its membership created confusion about its business practices and prompted “legal inquiries” from public officials. It said the move did not change the way it managed funds, and that its portfolio managers still assess climate risks.
The NZAMI said it was disappointed by the move but that it respected the decisions its signatories make.
NZAMI’s suspension follows a mass exodus of U.S. banks from its sister organization, the Net Zero Banking Alliance, or NZBA, raising questions about its future. Last week, JP Morgan Chase & Co. quit that organization, after the exits of Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. since the beginning of December.
Each said its decision to leave the group did not mean it was abandoning its net-zero goals or efforts to help clients meet their emission-reduction targets.
Canada’s Big Six banks remain members of the alliance, but the CEOs of Royal Bank of Canada and Bank of Montreal said at a conference last week that the NZBA may not be the most effective tool to encourage climate change efforts at major financial institutions.
Companies still need to manage climate risks and prepare for a lower-carbon economy, but worldwide organizations may not be the best way to accomplish that given differing situations in various jurisdictions, said Baltej Sidhu, an analyst at National Bank Financial.
“A large portion of this is going to be actuated toward litigation concerns, and also the politicization of the theme of ESG in the U.S.,” Mr. Sidhu said.
BlackRock chief executive officer Larry Fink had been at the forefront of integrating climate risks and decarbonization targets into its investing activities, but in recent years has backed off prioritizing the fight against climate change in his public messaging.
In November, Texas Attorney-General Ken Paxton sued BlackRock, State Street Corp. and Vanguard Group, accusing the major institutional investors of constricting the fossil fuel industry through “anticompetitive trade practices” by buying up shares and pushing green-energy goals. The fund managers have called the charges baseless. Vanguard quit NZAMI two years ago.
The sector-specific alliances exist under an umbrella called Glasgow Financial Alliance for Net Zero, which was unveiled with fanfare at the United Nations climate summit in 2021 as excitement over the potential for the might of the finance industry being directed at climate action crescendoed.
Former Bank of Canada and Bank of England governor – and potential federal Liberal leadership hopeful – Mark Carney, and Michael Bloomberg, the founder of Bloomberg L.P. and a former mayor of New York, are co-chairs.