The world’s biggest money manager is trying to avoid some political headaches as the GOP prepares to take over all of Washington.
BlackRock Inc. (BLK) late last week pulled out of a UN-supported climate group known as the Net Zero Asset Managers initiative (NZAM), following an exodus of several Wall Street banks from an affiliated group in 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 in the opening months of Trump 2.0.
The $11 trillion financial giant has for years been a target of GOP attacks about “woke” investing, with Republicans raising concerns about whether BlackRock’s massive holdings in US corporations force companies 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 financial system.
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BlackRock, which reports its fourth-quarter earnings Wednesday, will have to navigate all these political challenges as the GOP takes over the White House and Congress — a measure of control that could create new headaches for the money management giant.
A report last month from the House Judiciary Committee, led by Ohio Republican Jim Jordan, mentioned BlackRock along 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 companies.
The report also criticized financial environmental alliances, saying they have created what it called “a climate cartel.”
Last Thursday, BlackRock confirmed its departure from one financial environmental alliance known as the Net Zero Asset Managers initiative (NZAM).
The group had a pledge of support from its NZAM members to help achieve net zero emissions carbon emissions by 2050 by using their influence within the financial sector — such as 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 some 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 company added in the letter that its portfolio managers “continue to assess material climate-related risks.”
It added in that note that “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 FDIC had been asking BlackRock to sign by Jan. 10 a “passivity agreement” that would codify greater checks on the money manager’s holdings of FDIC-supervised lenders, pushing back a deadline that was previously Dec. 31 of this year.
The agreement the FDIC wanted BlackRock to sign was similar to one announced with Vanguard that imposed new compliance requirements when the manager amasses more than 10% of all outstanding stock in an FDIC-supervised bank.
It was designed to assure bank regulators that the giant 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 companies through its investment stewardship activities.
The Federal Deposit Insurance Corp (FDIC) logo at the FDIC headquarters in Washington. Photo: REUTERS/Jason Reed ·Reuters / Reuters
Last Friday, BlackRock’s deadline to respond to information requests from the FDIC was extended to Feb. 10, punting the standoff into the start of Trump’s new term as president.
As a practical matter, BlackRock must either rebut any presumption it has control of more than 10% in a holding company of an FDIC supervised bank by responding to the FDIC’s most recent information requests or sign a “passivity agreement,” according to one person familiar with the matter.
It is not yet known how the Trump administration may decide 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.
