Relationships between asset owners are being re-evaluated following the departure of NZAM as managers
The Net Zero Asset Managers (NZAM) initiative, a significant global coalition with 87 signatories managing nearly $37 trillion in assets, has faced challenges due to key asset managers withdrawing, including BlackRock and Vanguard [1][2].
The withdrawal of these major players has raised questions about the initiative's commitment to specific strategies for addressing climate risk. Despite the alliance's pledge to increase ambitions over time, concerns persist that this is not sufficient to gauge the true level of climate commitments among managers [1].
In response to these withdrawals, the Science Based Targets initiative (SBTi) has introduced the Financial Institutions Net-Zero Standard. This robust framework aims to enhance target-setting and accountability for asset managers and owners, offering a clear, actionable guide for aligning portfolios with net-zero climate goals [3].
The withdrawals from NZAM could lead asset owners to reconsider their relationships with managers regarding ESG and net-zero commitments. Asset owners may seek clearer or more tailored approaches to climate risk in their portfolios, given increased political scrutiny and varying approaches to climate risk [2][5].
Aegon's stewardship lead argues that alliances such as NZAM need to undertake the right activities in the most effective way. The strategic review initiated by the alliance is hoped to move it in the right direction [4].
Some asset owners view membership of the alliance as a "tick box exercise" that is no longer sufficient to gauge the true level of climate commitments among managers. US pension fund CalSTRS, which manages $349.7bn on behalf of educators in California, has approximately $4.3bn in exposures to BlackRock across various funds [6].
The departures from NZAM are attributed to political and legal pressure, particularly the anti-ESG movement in the US and Donald Trump's return to the White House [7]. BlackRock's exit from the climate coalition coincided with a lawsuit by 10 Republican states over alleged breaches on anti-trust regulations [8].
The Net Zero Asset Managers alliance has removed references to asset manager members from its site and initiated a review into its remit due to the departures. Diandra Soobiah, director of Responsible Investment for the £48bn master trust Nest, emphasizes the importance of managing climate change risk and its impacts on investments and the broader financial markets [9].
Fredric Nystrom, head of sustainability and governance at Swedish pension fund AP3, has stated that BlackRock's decision to leave NZAM will be one of many factors considered in their regular reviews of relationships with service providers. Aegon's stewardship approach is based on expression of which, whereby the team communicates its voting preferences with the manager ahead of the AGM and subsequently tracks voting patterns [10].
Samantha Chew, stewardship lead at Aegon, argues that BlackRock, despite leaving the alliance, has made significant progress on climate and has recently released new decarbonisation guidelines [11]. Some asset owners are questioning whether it is time for the alliance to review its priorities due to concerns about the lack of translatable action on climate [12].
This dynamic suggests the net-zero asset management landscape is evolving, with NZAM maintaining influence but adapting amid both internal critiques and external political-economic pressures. The introduction of the SBTi Financial Institutions Net-Zero Standard offers a promising avenue for enhancing the framework for asset managers and owners to set science-based targets and improve accountability.
References: 1. Net Zero Asset Managers initiative 2. BlackRock and Vanguard exit Net Zero Asset Managers initiative 3. SBTi Financial Institutions Net-Zero Standard 4. Aegon's stewardship lead on NZAM 5. Impact of withdrawals on asset owners 6. CalSTRS exposure to BlackRock 7. Political and legal pressure on departures 8. BlackRock's exit and lawsuit 9. Diandra Soobiah on climate change risk 10. Aegon's stewardship approach 11. Samantha Chew on BlackRock's progress 12. Review of NZAM priorities
- Environmental science, climate-change, and finance intersect in the Science Based Targets initiative (SBTi) Financial Institutions Net-Zero Standard, which aims to increase target-setting and accountability for asset managers and owners as they align portfolios with net-zero climate goals.
- The ongoing evolution of the net-zero asset management landscape, prompted by withdrawals from coalitions like the Net Zero Asset Managers (NZAM), may motivate asset owners to reassess their relationships with managers, seeking clearer and more tailored approaches to climate risk that prioritize science-based strategies in environmental-science.
