BlackRock quits climate change group in latest green climbdown

BlackRock chief executive Larry Fink (right) with Prime Minister Christopher Luxon at a Nato summit last year. Photo / Suuplied

BlackRock has become the latest financial firm to bail out of a big climate change industry group after Donald Trump’s election as US President and heightened regulatory scrutiny.

The world’s largest money manager told institutional clients in a letter on Thursday it had quit Net Zero Asset Managers (NZAM), a voluntary global group that describes itself as committed to “the goal of net zero greenhouse gas emissions by 2050 or sooner”.

Membership in NZAM had “caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials”, vice-chairman Philipp Hildebrand wrote, according to a copy of the letter seen by the Financial Times.

All six of the largest US banks, JPMorgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs, have quit a similar group for banks, the Net-Zero Banking Alliance, in recent weeks.

Since staking out a position in 2020 that “climate risk is investment risk”, BlackRock has come under sustained attack from US conservative politicians.

They have launched lawsuits, regulatory inquiries and boycotts, contending that the US$11.5 trillion (NZ$20.5t) money manager is using its large holdings to push climate activism and other forms of “woke capitalism” on American companies.

“This pullout actually just shows what they said in 2020 and 2021 was just performative and marketing,” said Tracey Lewis, head of climate policy at Public Citizen, a progressive advocacy group.

“Today, the truth is coming out as all these companies are trying to appease the incoming administration.”

Late last year, 11 Republican-led states sued BlackRock, Vanguard and State Street, alleging they had conspired to constrain coal supplies and further a “destructive, politicised environmental agenda”.

Federal banking and energy watchdogs have also launched inquiries into whether big money managers are meeting regulatory requirements to act as passive investors.

At the same time, progressive groups have grown increasingly critical of the money manager’s position that its clients’ financial interests must take primacy unless investors have specifically asked to prioritise sustainability.

BlackRock’s support for shareholder proposals on environmental and social issues has fallen from 47% in 2021 to 4% last year.

BlackRock has at times tried to thread the needle on this issue, in part because it also has a large group of clients in Europe who want faster progress on addressing climate change.

Last year, it took a middle ground on another climate body, Climate Action 100+, an investor group that lobbies companies to cut greenhouse gas emissions.

It quit the group as a global entity, but its smaller international arm has remained a member.

Vanguard quit NZAM more than a year ago, while State Street remains a member. Bond giant Pimco and Goldman Sachs’ asset management arm never joined.

In the letter, BlackRock said its departure from NZAM “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.”

Written by: Brooke Masters and Patrick Temple-West in New York

© Financial Times