Climate change mitigation seems to be challenged as corporations are seeing setbacks. Vanguard – the second-largest global asset manager after BlackRock, has pulled out of its net zero commitments.
The investment advisor exited the Net Zero Asset Managers (NZAM) initiative that commits its members to achieve net zero carbon emissions by 2050. The reason stated by Vanguard is that its commitment to become net zero and fight climate change resulted “in confusion about the views of individual investment firms”.
“We have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks – and to make clear that Vanguard speaks independently on matters of importance to our investors,” said the company in a statement.
The NZAM initiative also commented on Vanguard’s decision, saying it was regrettable.
“It is unfortunate that political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks,” said Kirsten Snow Spalding of Ceres – a founding partner of NZAM.
According to Vanguard’s statement, it will continue to offer products that use environmental, social and governance investing factors and net zero products to investors who want them.
The asset manager also plans to continue asking the companies it invests in how they plan to address climate risks. However, it seems like Vanguard will not aim to mitigate climate risks itself going forward.
The move also seems to be pressured by a larger attack from Republicans on ESG investing. As BlackRock is committed to achieving net zero, several Republican states have pulled cash management and other investment accounts from the company.
According to Texas Comptroller of Public Accounts – Glenn Hegar, NZAM membership was one of the factors he used to compile a list of organizations he accused of “boycotting” fossil fuels. There seems to be a widespread attack of Republicans in the US on financial institutions, claiming they are hostile to fossil fuels.
The recent news of setbacks on climate change commitments is also affecting carbon credits prices, according to CarbonCredits.com. Voluntary carbon market prices for offsets are under pressure, experiencing one of the worst days in their short history.