By Ross Kerber
(Reuters) - BlackRock (NYSE:BLK), the world's biggest asset manager, said on Thursday it will leave the Net Zero Asset Managers Initiative, the latest Wall Street firm to depart an environmentally focused investor group under pressure from Republican politicians.
BlackRock, which manages some $11.5 trillion, said that with two-thirds of its global clients committed to cutting emissions to net zero, it had made sense to join groups like the organization known as NZAMI.
"However, our memberships in some of these organizations have caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials," leading to the departure, according to a client letter reviewed by Reuters.
Its departure, BlackRock said, "does not change the way we develop products and solutions for clients or how we manage their portfolios." The firm said its active portfolio managers "continue to assess material climate-related risks."
NZAMI members pledge to support the goal of net zero greenhouse gas emissions by 2050, using influence such as how they vote their proxies at corporate meetings. The group currently counts more than 325 signatories managing more than $57.5 trillion, according to its website.
Major Wall Street lenders have left a similar climate organization for banks in recent weeks ahead of the return of U.S. President-elect Donald Trump and as his fellow Republicans take control of Congress. While the departures may not have a direct effect on lending or share purchases, the companies' participation was seen as a marker of investors' environmental priorities.
In December the Republican-led U.S. House of Representatives Judiciary Committee sought information from BlackRock and dozens of other asset managers involved with NZAMI. In November BlackRock and rivals were sued by Texas and 10 other Republican-led states that claimed their activism cut coal production and boosted energy prices.
BlackRock has denied wrongdoing and said the lawsuit "discourages investments in the companies consumers rely on."
BlackRock's exit so far has not prompted others to follow. Representatives for two of its rivals, the asset management arms of State Street (NYSE:STT) and JPMorgan, said on Thursday they remain NZAMI members. Another major passive fund manager, Vanguard, left the group in 2022.
A NZAMI spokesperson via email called any investor withdrawal disappointing.
"Climate risk is financial risk. NZAM exists to help investors mitigate these risks and to realise the benefits of the economic transition to net zero," the spokesperson said.
Leslie Samuelrich, president of Green Century Funds, oversaw her firm's departure from NZAMI in 2023 even though it avoids oil and coal stocks. On Thursday she called the departures by bigger firms "disheartening" since their memberships showed investors want lower-carbon portfolios.
"This is short sighted given the stark realities of climate change and the need to push for environmentally responsible actions in corporate America," Samuelrich said.
CLEANING THINGS UP
Efforts such as NZAMI, which was created in 2020 and boosted by a 2021 United Nations climate conference, began without controversy as world leaders looked for ways to harness capital to transition the world to cleaner energy sources.
But U.S. Republican officials, many from energy-producing states, have disparaged the efforts as "woke capital" claiming they violate antitrust laws.
In a statement sent by a representative, Judiciary Committee Chairman Jim Jordan called BlackRock's departure "a huge win for freedom and American prosperity. All U.S. financial institutions should follow suit and abandon the climate cartel and woke ESG policies," using an acronym referring to investor consideration of environmental, social and governance factors.
In its client letter, BlackRock said its sustainable-investment efforts are "driven by the needs of our clients and our continued investment conviction that the energy transition is a mega force shaping economies and markets."