Exclusive-Investor climate group suspends activities after BlackRock exit

By Simon Jessop and Ross Kerber

LONDON/BOSTON (Reuters) -A flagship coalition aimed at aligning the asset management industry with global climate goals said it was suspending its activities on Monday, days after BlackRock, the world's biggest investor, left amid a political backlash in the United States.

The pause raised concerns that companies will lower their efforts on climate change even after the hottest year on record, but could buy organizers time to review what actions might still be acceptable for U.S. fund firms.

BlackRock, which manages some $11.5 trillion inassets, left the Net-Zero Asset Managers(NZAM) initiative on Jan. 9 citing confusion over its climate efforts and legal inquiries from public officials. The step followed months of escalating pressure from someRepublican politicians over its stance on investing in fossilfuel companies, with concern that such pressure could risefurther as President-elect Donald Trump prepares to take office.

The group counted more than 325 signatories managing more than $57.5 trillion in assets as members, according to its website as of last week, before the departure of BlackRock.

In a letter to its members first reported by Reuters, the partner groups which help manage the NZAM said they had decided to conduct a review of its activities.

"Recent developments in the U.S. 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.

"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."

CONTAGION EFFECT

NZAM was set up in 2020 as executives and investors grew enthusiastic about solving climate change, sentiments that have faded. Still, changes by the NZAM initiative could prevent the sort of flight by asset managers that diminished the influence of another investor climate group, the Climate Action 100+, last year.

At the time, big fund firms cited independence concerns, not politics, as a reason for their dropping out. Since then pressure from U.S. Republican officials has increased on executives to back away from reflecting environmental, social and governance (ESG) assessments in their investment decisions.

These include an inquiry from the Republican-led U.S. House of Representatives Judiciary Committee and a lawsuit by Texas and 10 other Republican-led states that claimed that fund activism had cut coal production and boosted energy prices.

For its part, the NZAM initiative has asked members to support the goal, agreed by countries, of capping global warming and aiming to reach net-zero greenhouse gas emissions by 2050.

Kathy Mulvey, a campaign director for the Union of Concerned Scientists, a Massachusetts-based advocacy organization, said groups including NZAM "have been an important avenue to keep us on track" toward meeting emissions-reduction targets.

Whatever the results of NZAM's review, she said, "clearly the financial sector's actions to advance emissions reductions and the clean energy transition aren't going away."

Among other members of NZAM, a representative for JPMorgan's asset management arm declined to comment on Monday's move.

In a statement sent by a representative, State Street's asset management arm said it "supports the announced NZAM review and will carefully evaluate its findings upon completion."

(Reporting by Simon Jessop in London and by Ross Kerber in Boston. Editing by Jason Neely)