
The Net Zero Asset Managers (NZAM) initiative has released a statement saying it will suspend its activities following the departure of several big-name members including BlackRock, the world's largest asset manager.
What happened and what caused it?
The departures have occurred over the past several months with some pointing the finger at nervousness in the industry around Donald Trump’s re-election in November and his administration’s reticence around net zero initiatives.
Northern Trust has also left the group it was reported by Citywire on Wednesday.
Two weeks ago, six big US banks quit the banking net zero alliance equivalent before Trump’s inauguration it was reported.
However, like the Net Zero Insurance Alliance (NZIA) in 2023 the group has also seen worries about market share and possible accusations around competition.
Eventually the NZIA lost so many members and took on so much heat that the United Nations Environmental Programme (UNEP) reduced its goals to ‘voluntary best practice guide’ after months of poor headlines. “As before, NZIA members who publish their own decarbonisation targets and timelines do so unilaterally and independently,” it said at the time.
For investment teams at insurers, this meant two consequences: one, insurers that had been crying out for more guidance on sustainability issues and other net zero regulatory areas have one fewer place to turn for authority on the matter. However, those that have struggled with the administration burden of "ESG" or other climate change-related principles and frameworks will have one fewer set of obligations to follow.
It's likely the loss of the group would mean similar pressures will occur now in the asset management world.
This will also complicate the roles of operations staff at asset managers who are seeking to adhere to regulation around net zero and sustainability whilst navigating the more polarised environments - especially in the US - and more scrutiny.
What does the group look like?
The NZAM has taken down its list of signatories from its website while it undergoes its review.
In July last year, the group put out a report that stipulated since its previous target disclosures announcement, more than 30 asset managers had joined the initiative and over 90 had disclosed targets. As of 31 January 2024, 264 signatories have set and disclosed targets to guide their individual net zero investment practices.
So, what does it mean?
In its statement NZAM reiterated its goals and that this was not the end.
“The Net Zero Asset Managers initiative exists to help investors mitigate the material financial risks of climate change and to realise the enormous benefits of the economic transition to net zero,” said the organisation in its statement on the event.
“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,” it said. “Signatories will be consulted throughout the review process and informed of any updates in a timely and transparent fashion.”
NZAM added that whilst 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,” it said.
The statement concluded that “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”.
Just a few days before this, BlackRock had announced its departure from the group. “We are disappointed to see any investor withdraw, but as a voluntary initiative, we respect any individual decisions signatories take,” it said. “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.”
NZAM had been advocating for more aggressive short-term divestment goals from high-emission sectors that had caused some nervousness in – particularly – US asset managers.
Whether the group will restart operations remains unclear and whether aggressive US policies against net zero will inhibit its goals even if it does are also looming large.
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