Dive Brief:
- The United Nations-backed Net-Zero Asset Managers initiative announced Monday it would suspend all activities to track its signatories’ reporting and implement their commitments, as it undergoes a review of the program.
- NZAM said Monday that the voluntary initiative suspension and review were triggered by “recent developments in the U.S. and different regulatory and client expectations.”
- NZAM announced the operational pause in an unsigned statement just days after BlackRock, the world’s largest asset manager by AUM, pulled out of the initiative. It also follows a wave of major U.S. banks pulling out of a related organization, the Net-Zero Banking Alliance.
Dive Insight:
In a Jan. 10 statement following BlackRock’s departure, NZAM said it was “disappointed to see any investor withdraw, but … respect[s] any individual decisions signatories take.”
In the Jan. 13 statement announcing the program pause, NZAM said the review will look to ensure it “remains fit for purpose in the new global context.”
Until the review is completed — and depending on its outcome — all of the NZAM’s signatories have been removed from the website, along with the group’s commitment statement, signatories’ targets and any related case studies.
“As a voluntary initiative, NZAM has successfully supported investors globally as they have sought to navigate their own individual paths in the energy transition in line with their fiduciary duties and clients’ long-term financial objectives,” the suspension announcement said. “NZAM looks forward to continuing to play this constructive role with investors around the world.”
NZAM’s review comes amid a complicated global political landscape related to climate disclosures and other ESG issues.
A Republican-led Congress and President-elect Donald Trump’s incoming administration have shifted U.S. companies’ calculations on climate alliances and diversity, equity and inclusion programs.
In the past month, NZBA saw six major U.S. banks leave the alliance, and a tide of companies rolling back DEI initiatives has resumed with McDonald’s, Meta and Amazon announcing policy changes in the new year.
The House Judiciary Committee led a yearslong investigation into members of NZAM, Climate Action 100+ and similar organizations. A committee spokesperson told ESG Dive Tuesday that NZAM’s announcement confirms the committee’s allegations that such groups represent “collusion to impose radical ESG goals” and violate U.S. antitrust laws.
“All American financial institutions should follow suit and end woke policies that put ideology above the interests of American consumers,” the committee spokesperson said.
Responsible investment nonprofit ShareAction Director of Policy Lewis Johnston called the decision “a backwards step” in a Tuesday statement.
“As deadly wildfires rage on in Los Angeles, the threat of climate change and the extreme weather it can bring has never been more clear,” Johnston said. “Climate risk is financial risk, and any approach to responsible investment must address the ongoing climate crisis.”
While Johnston acknowledged such voluntary groups have limitations, he said “collaboration is critical” to addressing climate change, and such groups “can play an important role in sharing best practice and encouraging commitments.”
Ben Cushing, who directs climate nonprofit Sierra Club’s Fossil-Free Finance campaign, said in a statement Monday that the suspension of NZAM activities "undermines asset managers’ fiduciary duty to mitigate the growing risks that climate change poses to investors’ life savings.”
“Too many of NZAM's members were already falling far short of their voluntary climate goals, so we hope this ‘review process’ leads to the bar being raised, not lowered, for firms to maintain their membership,” Cushing said.
Tracey Lewis, senior counsel for climate policy at consumer advocacy nongovernmental organization Public Citizen, said in an interview Tuesday that the backtracking by financial institutions is “purely political” and puts consumers and Americans’ pension plans at risk.
Despite the shifting U.S. political environment related to ESG issues, corporations — particularly large multinationals — will be required by other government entities to comply with climate-disclosure regulations in California, the European Union and many other jurisdictions in the coming years.
“All the rest of the world is moving in this direction because they understand the impacts of climate-related financial risk on investors,” Lewis told ESG Dive.
