Blackrock’s withdrawal from the Net Zero Asset Managers (NZAM) initiative has sparked debate, but institutional investors remain largely unaffected. The move is unlikely to disrupt Blackrock’s business or its relationships with European asset owners.
Many investors view Blackrock’s decision, made before Donald Trump’s inauguration as the 47th U.S. president, as a response to political pressures rather than a retreat from addressing climate risks. Blackrock reiterated that climate risk remains an investment risk and assured clients that the withdrawal would not affect products or portfolio management.
“European asset owners re-evaluate their manager selection criteria only once a year,” noted an industry observer. “The key takeaway is Blackrock’s assurance that their approach remains unchanged.”
This reassurance has eased concerns. Investors also point to Blackrock’s investments in sustainable strategies and tools like its Aladdin climate investment tool as evidence of its continued focus on managing climate-related risks.
Scrutiny of voluntary alliances
The decision has raised questions about the effectiveness of voluntary climate initiatives like NZAM and the Net Zero Banking Alliance (NZBA). Critics argue these alliances lack enforceable frameworks and measurable impact, leaving them vulnerable to political and market pressures.
“This situation highlights a deeper flaw: the reliance on voluntary initiatives like NZAM,” said Gijs Groeneboom, a Dutch ESG consultant. “We need stronger frameworks—clear, enforceable policies that reduce political guesswork.”
The exodus of U.S.-based financial institutions from these alliances, including Wall Street’s six largest banks and other asset managers like Vanguard, underscores their fragility. Blackrock said its NZAM membership caused “confusion” and prompted legal inquiries, reflecting the tension between global ESG goals and domestic political realities.
Ken Pucker, a professor at Tufts University, said Blackrock’s decision shows the limitations of green alliances and a misalignment between ESG narratives and investment priorities. He described financial institutions as “flaccid signaling devices that respond to political pressures.”
Blackrock’s ESG leadership
Despite leaving NZAM, Blackrock continues to position itself as a leader in sustainable investing, managing over one trillion dollars in sustainable strategies as of September 2024.
“Our participation in NZAM did not impact the way we managed client portfolios,” wrote Philipp Hildebrand, vice chairman, and Helen Lees-Jones, global head of sustainable and transition solutions, in a letter to clients. “Therefore, our departure does not change how we develop products or manage portfolios.”
For Groeneboom, Blackrock’s exit shows how political pressures can undermine climate action. “Blackrock’s actions send a clear message,” he said. “This is a massive setback.”
The timing of Blackrock’s withdrawal was criticised. That same week, wildfires in Los Angeles claimed 24 lives, left 16 missing, and caused over 135 billion dollars in damages. “These fires are fueled by the same climate crisis these net-zero pledges aim to combat,” Groeneboom observed.
Stranded assets
While Blackrock’s business remains unaffected, concerns over stranded assets persist. These are investments that lose value due to climate-related factors, including transition risks tied to regulations or carbon pricing and physical risks from extreme weather events, such as the LA fires.
Peter Zink Secher, an ESG expert, expressed concern over stranded assets. “Could this lead to increased oil and gas exposure or high emitters turning to these banks for borrowing?” he asked. Secher compared Blackrock’s move to “being a vegetarian every other day,” suggesting mixed signals on sustainability commitments.