The Net Zero Asset Managers (NZAM) initiative announced Monday it is suspending activities. The move comes after BlackRock, with $11.5 trillion in assets under management, joined an exodus of mega-firms leaving net-zero groups. 

The initiative said on Friday it was “disappointed” in BlackRock’s decision, and in Monday’s announcement, NZAM said it would remove the list members and their net-zero commitment statements from the website. 

A "new review"

“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,” the initiative said in a statement. 

Over the past month, six of the largest U.S. banks left a similar group for banks, the Net-Zero Banking Alliance (NZBA). Critics have referred to NZAM and the NZBA as “cartels,” and its sudden collapse follows a series of retreats from other environmental, social and governance (ESG) initiatives. In 2021 and 2022, federal, state, and local government officials introduced 563 measures, according to a UCLA study, limiting critical race theory (CRT) in schools. This year, more than two dozen companies — Amazon being the latest — revised or canceled their diversity, equity and inclusion (DEI) policies. 

Adding to the anti-ESG dogpile, U.S. District Judge Reed O'Connor in Texas Friday ruled that American Airlines had violated federal law by utilizing ESG goals when investing for its employees retirement plans. 

"The evidence made clear that [American Airlines'] incestuous relationship with BlackRock and its own corporate goals disloyally influenced administration of the Plan,” O'Connor, an appointee of Republican former President George W. Bush, said in his ruling, according to Reuters. 

The collapse of net zero alliances among investment firms and banks represents the third pillar of the progressive left to collapse as President Trump begins his second term as president. While some companies are adjusting policies, experts warn that some commitments, especially the pursuit of net zero emissions, remain. So, investment firms may continue to try to push companies to reduce their emissions in opposition to fiduciary obligations. 

Lawsuits and investigations

Prior to the withdrawals from net-zero coalitions, the firms were facing investigation by the House Judiciary investigation and lawsuits alleging some practices may have violated antitrust laws. 

Texas Attorney General Ken Paxton, in a coalition of 11 state attorney generals, filed a lawsuit against BlackRock, State Street Corporation and Vanguard Group, alleging the firms conspired to artificially constrict the market for coal through anti-trade practices. The companies denied the allegations. StateStreet and Vanguard were members of the NZAM, but Vanguard withdrew in 2022. 

States, such as Mississippi and Indiana, have also taken legal action against BlackRock and others over their ESG activities.

"A climate cartel"

In December the U.S. House Judiciary Committee released a report, alleging that a “climate cartel” consisting of various climate coalitions, including two other net-zero alliances — Ceres and its Climate Action 100+ initiative — coordinated a “pressure campaign” against ExxonMobil when it refused to adopt policies that would reduce its emissions, which would effectively require it to reduce production of oil and gas.

A week after the report was released, the committee sent letters to 60 U.S.-based asset management companies asking them for information about activities related to their membership with the Glasgow Financial Alliance for Net Zero, another net-zero alliance, and Net Zero Asset Managers. The letters explained it was an investigation into possible violations of antitrust laws. 

Bullies

Rep. Harriet Hageman, R-Wyo., who sits on the Judiciary Committee, told Just the News that the withdrawals from the net-zero alliances suggest that firms are starting to realign objectives with their clients’ needs. 

“I always questioned why multibillion-dollar companies allowed themselves to be bullied by extremists into making poor financial decisions, breaching their fiduciary responsibilities, and pursuing policies that ultimately provided no environmental benefits,” Hageman said. 

Will Hild, director of Consumers’ Research, told Just the News that, while the election of Donald Trump has influenced some of these decisions, Paxton's lawsuit likely had a lot more to do with the firms’ departures from the net zero alliances. 

“They are terrified, and that is the reason why,” Hild said, adding that it doesn’t mean they’re done with net zero. 

In a letter to its clients explaining its decision to depart NZAM, according to Reuters, BlackRock said its memberships in these net-zero organizations “caused confusion” regarding BlackRock’s practices, and it exposed them to legal inquiries from various public officials. However, the company said in the letter that it will "continue to assess material climate-related risks." 

“This doesn't change any of the way we're going to be operating or any of the commitments they've made. So they're not giving up yet on their individual Net Zero pledge. What they're giving up on is colluding with the other firms,” Hild said. 

Tom Jones, executive director of the American Accountability Foundation, said in an interview that there have been a lot of positive developments on the pushback against ESG. But BlackRock’s statements and other indications should give ESG critics pause to think their battle is won. 

“I caution folks to not make the leap that this is a rejection of ESG. I think what you've seen in some of the announcements, particularly BlackRock, is like, ‘yeah, we're getting out, but we're going to do the same stuff we've always been doing with regard to environment, social, governance,’” Jones said. “This is a positive development, but not an abandonment of using their proxy voting power to bully companies into adopting left-wing policies.” 

The antitrust lawsuits have given them a scare, Jones explained, and the legal vulnerabilities will have them readjusting strategies. He said these large ESG-promoting firms are a lot like the federal government.

“Trump's being sworn in next Monday at noon, but all the people that Biden hired who have a left-wing policy perspective, those people are going to be there on Tuesday morning doing the same thing that they did before,” Jones said. 

So, even if all these investment and banking firms have walked away from net-zero coalitions, Jones said, it “doesn't mean that they've gotten rid of the stewardship people in the C suite or the the DEI director in the C suite who are pushing radical personnel policies.” 

Alex Stevens, manager of policy and communications with the Institute for Energy Research, told Just the News, that there isn’t a similar retreat from net-zero corporate policies in the European Union. With energy companies operating internationally, this could continue to influence operations in the U.S. 

“There's political pushback here in the U.S., but there's still gonna be requirements over in the EU. That'll be something to keep an eye on,” he said. 

Very alarming

Hild, with Consumers’ Research, said he suspects there was some coordination between the firms announcing their departures from the net-zero groups. The departures were spread out over a period of a few weeks, and none of them were announced on the same day. 

“That should be very alarming for the American people that you have companies that are supposedly each other's biggest competitors. Yet they're clearly coordinating their activities together,” Hild said. 

Even if investment and banking firms stop activities that could potentially run afoul of federal antitrust laws, Consumers’ Research has been warning companies that their net-zero policies still carry legal vulnerabilities. 

New York Attorney General Letitia James in February filed a lawsuit against Brazilian-based beef producer JBS, alleging the company had committed fraud with its net-zero commitments. Since these commitments had no realistic way to be achieved, the lawsuit argues, then they are defrauding consumers by advertising them. 

Consumers’ Research sent letters to several food producers who had similar commitments, warning that they could face similar legal liabilities as JBS. Hild said that investment firms may pressure companies to pursue net zero, but that could lead to a “tug of war” between the companies and the firms. This, he said, is a problem of their own making. 

“Give out the world's tiniest violin for these corporate leaders who should have had a spine and stood up to the left when they were demanding they make these nonsense anti-consumer commitments. Instead they caved, and now they have gotten themselves into a Chinese finger trap,” Hild said. 

Clear paths

Stevens, with the Institute for Energy Research, said one positive development from all this is making energy investments in coal, oil, natural gas and nuclear more attractive. 

“In any sort of traditional energy sources, there’s going to be a clear path there,” he said. 

When energy companies have more capital, they can expand operations, build infrastructure, or invest in efficiencies that will ultimately benefit consumers. 

Hageman also said these recent developments in the world of ESG will produce good outcomes for American consumers. 

“I am pleased that Net Zero Asset Managers have suspended their operations and, with the Republican led pro-energy policies that we will be pursuing, expect a brighter future for all Americans. I look forward to unleashing America’s energy potential, reducing energy poverty, and being the champions of abundance,” Hageman said.