The Net Zero Asset Management (NZAM) initiative – an asset manager group set up to support the goal of achieving net-zero greenhouse gas emissions by 2050 or sooner – is suspending its activities after the exodus of big hitting asset manager Blackrock from the group.
In a statement, the NZAM said: “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. Signatories will be consulted throughout the review process and informed of any updates in a timely and transparent fashion.
“As the initiative undergoes this review, it is suspending activities to track signatory implementation and reporting. 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.”
As a voluntary initiative it has aimed to support asset managers globally as they sought to navigate their own paths in the energy transition.
Conspiring to construct
Events seem to have snowballed after Texas attorney general Ken Paxton sued Blackrock, State Street and Vanguard for what was described as “conspiring to artificially constrict the market for coal through anticompetitive trade practice”, in November last year due to their net-zero commitment and plans to phase out coal investments.
Setting out its case, the Texas Attorney General’s Office said in a statement: “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.”
The complaint was given extra weight after the attorney generals of Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia and Wyoming jumped behind the Texas’ attorney general and issued their support.
This appears to have prompted Blackrock to exit the NZAM initiative, which it announced on January 10. Possibly seeing the complicated road ahead, Vanguard exited the NZAM back in December 2022.
State Street has thus far held firm, but said in statement it would “evaluate” the findings of the NZAM review.
Financial risk
Reacting to NZAM suspending of its activities, Lewis Johnston, director of policy at responsible investment campaigner Share Action, said: “Climate risk is financial risk, and any approach to responsible investment must address the ongoing climate crisis.” Johnston then noted how the initiative was an important part of collaboration among investors to address net zero.
“Collaboration is critical for addressing this global challenge, and whilst voluntary initiatives have limitations, they can play an important role in sharing best practice and encouraging commitments,” he said. “The announcement that NZAM is suspending operations is a backwards step.”
And he concluded: “Alongside this, we need regulators to set ambitious policies to raise standards and ensure that the financial sector is playing its part in driving the transition to net-zero economies that the world needs.”
Patrick McCully, senior analyst at Reclaim Finance, which campaigns to put finance to good use for the climate, was more scathing.
“The symbolism of Wall Street’s largest investor telling corporate boards and management that they had to address climate change was important, and the symbolism is also important of them now saying lets just forget all that stuff and bend the knee to the climate denialists about to move into the White House,” he said.
It does seem that Donald Trump’s presidential return could well halt the drive towards net-zero initiatives in the US.
Trump has already promised to reverse Joe Biden’s offshore oil and gas drilling ban, and, more importantly, remove the US from the Paris Agreement – the key global treaty addressing climate change.
NZAM future
Given the suspension of its activities, there is now a big question mark over whether NZAM will be able to continue with its work.
In its statement NZAM had no doubt, saying it “looks forward to continuing to play this constructive role with investors around the world”.
The trend of withdrawal by big-hitting players from net-zero initiatives seems to be part of a trend.
The Net Zero Banking Alliance (NZBA) has seen JPMorgan Chase depart the group on the back of Goldman Sachs, Wells Fargo, Citigroup, Bank of America and Morgan Stanley all leaving since the start of December.
It leaves the NZBA in a sorry state. Only three US banks now remain in the NZBA: Amalgamated Bank, Areti Bank and Climate First Bank, which hardly carry the same gravitas as the big names that have left the group.
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