The Net Zero Asset Managers (NZAM) initiative was launched in December 2020, aiming to galvanise asset managers to commit to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner and to supporting investing aligned with this goal.
Initially NZAM had significant international support from some of the world’s largest asset managers, including those in the US. By early 2024, the initiative had attracted over 300 signatories across 35 countries, responsible for over US$57.5 trillion in assets under management.
NZAM’s commitments required members to set interim (2030) decarbonisation targets, integrate climate considerations into investment strategies, engage with investee companies and work towards reducing portfolio emissions.
Alongside initiatives like Climate Action 100+, the investor engagement initiative seeking to pressure high-emitting companies to adopt net-zero strategies, NZAM was viewed as a positive force in driving financial sector-led climate action.
Recent developments
However, recent months have seen a shift, with some prominent fund management firms including BlackRock, Vanguard, Northern Trust and Baillie Gifford, exiting one or both climate-focused asset manager initiatives. This trend reflects a combination of political, regulatory, legal and operational factors.
Separately, several major US and Canadian banks have exited the Net Zero Banking Alliance.
NZAM launches review, suspends activities temporarily
NZAM recently announced it was launching a review to ensure its initiative remained fit for purpose in the new global context. Whilst it undergoes this review, NZAM has suspended activities tracking signatory implementation and reporting. Pending the outcome of the review, NZAM has also removed the commitment statement and list of signatories from its website, as well as their targets and related case studies.
Political and Regulatory Pressures
In the United States, climate change activism is dwindling. The election of President Donald Trump, who has been vocal in his scepticism towards climate change initiatives, has led to intensified examination of whether ESG investing practices are being prioritised above fund managers’ fiduciary duties to investors.
The U.S. Securities and Exchange Commission (SEC) has tightened controls over shareholder proposals on environmental and social issues, restricting influence on corporates’ ESG policies. The SEC’s previous Biden-era guidance in 2021, which had expanded the scope of permissible shareholder resolutions, has now been reversed creating a higher hurdle for investors wishing to engage with corporates on sustainability issues.
There may also be some watering down of the EU’s environmental reporting requirements in response to complaints that their burden and regulatory complexity are hampering EU companies’ competitiveness relative to their US and Asian counterparts. In January 2025, in a submission to the European Commission, France urged a “massive regulatory pause” on key pieces of EU legislation including the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. Earlier, Germany had called for a delay to the reporting directive’s obligations for smaller companies.
Less climate-related analysis and integration? Or greenhushing?
In an increasingly politically-charged environment, withdrawal from the initiatives doesn’t necessarily mean the sidelining of climate-related evaluation of risk and opportunity in investment analysis and decision making.
Institutions and fund management companies could continue embedding sustainability, but without prominently showcasing their efforts and attracting scrutiny. They may choose to downplay their sustainability practices, underreport or curtail information about their environmental efforts and impact – “greenhushing” – and walk a fine line between limiting the extent of environmental information made publicly available and limiting public scrutiny on sustainability practices. This is different to greenwashing, which is the misrepresentation or overstatement of environmental effort and achievement to appear more eco-friendly.
It can be argued that greenhushing also doesn’t serve investors as it obscures information on climate-related efforts. After all, transparency isn’t just about providing information, it’s also an important element in promoting and maintaining trust.
Arlingclose’s ESG and Responsible Investment Service advises on developments, themes and ‘direction of travel’ for ESG investments.
To discuss how our investment and ESG service and advice could help you, contact us at info@arlingclose.com.
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