In this week’s edition of Economy and Society:
- EU bank regulators release stricter ESG guidelines
- BlackRock leaves net-zero alliance
- Net-Zero Asset Managers Initiative suspends operations
- JP Morgan joins other banks in leaving NZBA
- Judge rules American Airlines violated fiduciary duties
Around the world
EU bank regulators release stricter ESG guidelines
What’s the story?
The European Banking Authority released new guidance last week outlining additional measures for banks to assess their climate risks.
Why does it matter?
The guidelines highlight the increasing divide between American and European banks. While American banks continue to leave net-zero organizations and have moved away from ESG approaches, European regulators are promoting increased ESG financial considerations.
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According to Bloomberg:
“ESG risks, in particular environmental risks through transition and physical risk drivers, pose challenges to the safety and soundness of institutions and may affect all traditional categories of financial risks to which they are exposed,” the European Banking Authority said in a statement on Thursday.
Banks should employ scenarios to identify, prepare for and mitigate potential risks from individual exposures as well as at a portfolio level and across industrial sectors, the EBA said. Particular consideration should be given to the fossil fuel industry, and measures should include quantitative targets for financed emissions. …
Regulators and policymakers in Europe have been tightening requirements for disclosing and preparing for potential ESG risks. In its new guidelines, which have been months in the making, the EBA said banks should look at least 10 years into the future, assess customers’ dependency on fossil fuels, and review their net zero transition plans.
On Wall Street and in the private sector
BlackRock leaves net-zero alliance
What’s the story?
BlackRock—the world’s largest asset manager—announced Jan. 9 that it is leaving the Net-Zero Asset Managers Initiative (NZAM), a United Nations-affiliated group promoting emission reductions.
Why does it matter?
BlackRock has over $11 trillion in assets under management, nearly 20% of the $57.5 trillion NZAM’s signatories managed as of October 2024. The firm’s departure is part of a larger trend of American financial institutions leaving global climate groups.
Blackrock said in a letter following the announcement that legal pressure from U.S. public officials influenced the decision. The departure follows a House Judiciary Committee report last month alleging financial firms’ participation in global climate groups was anti-competitive. It also comes less than two weeks ahead of President-elect Donald Trump’s (R) inauguration.
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According to Bloomberg:
The money manager has decided to leave the Net Zero Asset Managers initiative, it said in a letter to clients on Thursday. Membership in the group “caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials,” the New York-based firm said. …
“BlackRock has hung in there as long as it could, but the pressure has become too great, and the reputational and legal risks too high, just before Trump takes office,” Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, said in an emailed comment. And it “won’t be the last financial organization to quit a net zero initiative,” she said.
BlackRock was mentioned, along with firms including State Street Corp. and Vanguard Group Inc., in a report last month from the House Judiciary Committee that said it found “evidence of collusion and anticompetitive behavior” by the financial industry to “impose radical ESG-goals” on US companies.
Net-Zero Asset Managers Initiative suspends operations
What’s the story?
NZAM announced Jan. 13 that it is suspending operations and removing the commitment statement and list of signatories from its website. The group said in a statement it will reevaluate its plans and operations in light of “[r]ecent developments in the U.S. and different regulatory and client expectations in investors’ respective jurisdictions.”
Why does it matter?
Anti-ESG officials in the United States will likely perceive the suspension as a victory. The decision reshapes the global ESG landscape and highlights growing differences in expectations of regulators and investors around the world.
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According to Pensions & Investments:
In a statement on its website posted Jan. 13, NZAM said that signatories will be consulted throughout the review process, and during the process is it suspending the tracking of signatory implementation and reporting, as well as removing the commitment statement and list of NZAM signatories from its website and their targets and related case studies.
The suspension of NZAM activities is pending the outcome of the review to “ensure NZAM remains fit for purpose in the new global context,” according to the update.
The announcement comes on the heels of BlackRock’s Jan. 9 letter to clients saying that it would be leaving the initiative. NZAM said in an earlier Jan. 13 statement that “we are disappointed to see any investor withdraw, but as a voluntary initiative, we respect any individual decisions signatories take.”
J.P. Morgan joins other banks in leaving NZBA
What’s the story?
J.P. Morgan announced last week that it is leaving the Net-Zero Banking Alliance (NZBA), joining three other major U.S. banks that have made similar announcements in 2025.
Why does it matter?
J.P. Morgan is the largest bank in the world by deposits. Its decision to leave NZBA—following similar decisions by Morgan Stanley, Citigroup, and Bank of America last week (and Goldman Sachs and Wells Fargo previously)—leaves the alliance without any of the largest American banks among its members.
What’s the background?
For last week’s coverage of the bank departures, click here.
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According to ESG Today:
JPMorganChase has chosen to exit the Net-Zero Banking Alliance, ESG Today has confirmed, marking the latest in a rapid-fire series of departures from the UN-backed coalition of banks dedicated to advancing global net zero goals through their financing activities. …
Following the departure of JPMorgan, the only remaining U.S. banks listed on the NZBA website are Amalgamated Bank, Areti Bank, and Climate First Bank. …
The bank’s statement added that the firm plans to continue engaging with GFANZ and other groups, “to advance pragmatic solutions and market conditions that can help further a low-carbon and energy-secure future.”
Judge rules American Airlines violated fiduciary duties
What’s the story?
U.S. District Judge Reed O’Connor ruled Jan. 10 against the ESG considerations in American Airlines’ retirement plan. O’Connor argued the ESG investments did not align with the company’s legal obligation to make investments solely for the financial benefit of retirees. He said federal law prohibited non-financial considerations in investments, “no matter how noble it might view the aim.”
Why does it matter?
This ruling marks the first major federal decision opposing ESG investments, potentially paving the way for further legal challenges to retirement and pension plans that integrate ESG factors into their strategies.
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According to The Wall Street Journal:
In the suit, an American airline pilot alleged that the company’s retirement investment plans through BlackRock underperformed because of the firm’s ESG focus. …
The judge said that American’s “incestuous relationship with BlackRock and its own corporate goals disloyally influenced administration of the Plan.” …
The judge said BlackRock supported proposals linked to climate change that were unrelated to economic interests. He said the airline “utterly failed to loyally investigate BlackRock’s ESG investment activities.”