The world’s biggest money manager is attempting to avoid some political headaches because the GOP prepares to take over all of Washington.
BlackRock Inc. (BLK) late last week pulled out of a UN-supported climate group generally known as the Net Zero Asset Managers initiative (NZAM), following an exodus of several Wall Street banks from an affiliated group within the weeks before Donald Trump takes over the White House again.
BlackRock also was granted more time to resolve a standoff with the Federal Deposit Insurance Corporation (FDIC) over its holdings of US banks, ensuring that the dispute will now play out within the opening months of Trump 2.0.
The $11 trillion financial giant has for years been a goal of GOP attacks about “woke” investing, with Republicans raising concerns about whether BlackRock’s massive holdings in US corporations force corporations to adopt environmental, social and governance (ESG) standards. BlackRock CEO Larry Fink has backed away from using the politically contentious acronym.
And Democrats have for years also been leery about whether the heft of BlackRock could pose risks to the economic system.
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BlackRock, which reports its fourth-quarter earnings Wednesday, can have to navigate all these political challenges because the GOP takes over the White House and Congress — a measure of control that might create latest headaches for the cash management giant.
A report last month from the House Judiciary Committee, led by Ohio Republican Jim Jordan, mentioned BlackRock together with Vanguard and State Street (STT) in arguing that it found “evidence of collusion and anticompetitive behavior” by the financial industry to “impose radical ESG-goals” on US corporations.
The report also criticized financial environmental alliances, saying they’ve created what it called “a climate cartel.”
Last Thursday, BlackRock confirmed its departure from one financial environmental alliance generally known as the Net Zero Asset Managers initiative (NZAM).
The group had a pledge of support from its NZAM members to assist achieve net zero emissions carbon emissions by 2050 by utilizing their influence inside the financial sector — corresponding to supporting climate initiatives in corporate boardrooms through proxy voting.
Britain’s Prime Minister Keir Starmer, right, meets with the CEO of Blackrock Larry Fink near the United Nations on Sept. 25. Photo: Leon Neal/Pool via REUTERS ·via REUTERS / Reuters
“Our memberships in a few of these organizations have caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials,” BlackRock told clients in a letter cited by Bloomberg.
The corporate added within the letter that its portfolio managers “proceed to evaluate material climate-related risks.”
It added in that note that “recent developments within the U.S. and different regulatory and client expectations in investors’ respective jurisdictions have led to NZAM launching a review of the initiative to make sure NZAM stays fit for purpose in the brand new global context.”
The FDIC had been asking BlackRock to sign by Jan. 10 a “passivity agreement” that may codify greater checks on the cash manager’s holdings of FDIC-supervised lenders, pushing back a deadline that was previously Dec. 31 of this 12 months.
The agreement the FDIC wanted BlackRock to sign was just like one announced with Vanguard that imposed latest compliance requirements when the manager amasses greater than 10% of all outstanding stock in an FDIC-supervised bank.
It was designed to guarantee bank regulators that the enormous money manager will remain a “passive” owner of an FDIC-supervised bank and won’t exert control over a bank’s board. Currently, BlackRock only has such an agreement with the Federal Reserve.
BlackRock spent much of 2024 denying that it exerted undue control over corporations through its investment stewardship activities.
The Federal Deposit Insurance Corp (FDIC) logo on the FDIC headquarters in Washington. Photo: REUTERS/Jason Reed ·Reuters / Reuters
Last Friday, BlackRock’s deadline to answer information requests from the FDIC was prolonged to Feb. 10, punting the standoff into the beginning of Trump’s latest term as president.
As a practical matter, BlackRock must either rebut any presumption it has control of greater than 10% in a holding company of an FDIC supervised bank by responding to the FDIC’s most up-to-date information requests or sign a “passivity agreement,” in response to one person aware of the matter.
It just isn’t yet known how the Trump administration may determine to handle the BlackRock situation or who will run the FDIC following the Republican takeover of the White House.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
