BlackRock leaves climate group in latest green climbdown

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BlackRock has become the latest financial firm to bail out a major climate group in the wake of Donald Trump’s election as US president and heightened regulatory scrutiny.

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

Membership of NZAM had “created confusion regarding BlackRock’s practices and exposed us to legal investigations by various public officials”, deputy 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 left a similar group for banks, the Net-Zero Banking Alliance, in recent weeks.

Since he laid 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 probes and boycotts, alleging the $11.5 billion money manager is using its vast holdings to push climate activism and other forms of “woke capitalism” on corporate America.

Late last year, 11 Republican-led states sued BlackRock, Vanguard and State Street, alleging they conspired to limit coal supply and advance a “destructive, politicized environmental agenda.” Federal banking and energy watchdogs have also launched investigations into whether managers of big money meet regulatory requirements to act as passive investors.

At the same time, progressive groups have become increasingly critical of the money manager’s position that their clients’ financial interests should come first unless investors have specifically asked to prioritize sustainability.

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

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

Last year, it took a middle ground on another climate body, Climate Action 100+, an investor group that lobbies companies to reduce greenhouse gas emissions. It left the group as a global entity, but its smaller international arm has remained a member.

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

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 significant climate-related risks along with other investment risks.”