The world’s largest money manager is trying to avoid political trouble as the Republican Party prepares to take over all of Washington.
BlackRock Inc. (BLK) withdrew from a UN-backed climate group known as the Net Zero Asset Managers Initiative (NZAM) late last week, 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 was also given more time to resolve an impasse with the Federal Deposit Insurance Corporation (FDIC) over its holdings in US banks, meaning the dispute will now play out in the early months of Trump 2.0.
The $11 trillion financial giant has been the target of Republican Party attacks over “woke” investments for years, with Republicans raising concerns about whether BlackRock’s vast stakes in US companies are forcing companies to adopt environmental, society and governance (ESG). BlackRock CEO Larry Fink has backed away from using the politically controversial acronym.
And Democrats have also been wary for years about whether BlackRock’s weight could pose risks to the financial system.
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BlackRock, which reports fourth-quarter earnings on Wednesday, will have to deal with all these political challenges as the Republican Party takes over the White House and Congress — a level 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, named BlackRock along with Vanguard and State Street (STT) in arguing that it had found “evidence of collusion and anticompetitive conduct” by the financial sector to “impose radical ESG strategies”. objectives” for American companies.
The report also criticized financial environmental alliances, saying they have created a “climate cartel.”
Last Thursday, BlackRock confirmed its departure from an environmental financial 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 carbon emissions by 2050 by using their influence within the financial sector – such as supporting climate initiatives in corporate boardrooms by through proxy voting.
British Prime Minister Keir Starmer (right) meets Blackrock CEO Larry Fink at the United Nations on September 25. Photo: Leon Neal/Pool via REUTERS ·via REUTERS/Reuters
“Our memberships with some of these organizations have caused confusion about BlackRock’s practices and subjected us to legal investigations from various government 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.”
On Monday, the Net Zero Asset Managers initiative said on its website that it had suspended operations pending a review.
It added in that note that “recent developments in the US and differing expectations from regulators and clients in respective investor jurisdictions have led to the NZAM launching a review of the initiative to ensure that the NZAM remains fit for purpose intended purpose in the new global context.”
The other delicate political situation BlackRock is now grappling with is resistance to the FDIC’s push for more oversight.
The FDIC had asked BlackRock to sign a “passivity agreement” by Jan. 10 that would codify stricter controls on the money manager’s assets of FDIC-audited lenders, pushing back a deadline previously set for Dec. 31 this year.
The agreement the FDIC wanted BlackRock to sign was similar to the one announced with Vanguard, which imposed new compliance requirements when the manager collects more than 10% of all outstanding shares in an FDIC-controlled bank.
It was designed to assure bank regulators that the giant money manager will remain a “passive” owner of an FDIC-controlled bank and will not exercise control over a bank’s management. Currently, BlackRock only has such an agreement with the Federal Reserve.
BlackRock spent much of 2024 denying that it exerted unlawful control over companies through its investment management business.
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 FDIC information requests was extended to Feb. 10, marking the impasse that marks the start of Trump’s new term as president.
In practice, BlackRock must either refute any suspicion that it controls more than 10% in a holding company of an FDIC-controlled bank by responding to the FDIC’s most recent information requests or sign a “passivity agreement,” according to a known person. with the case.
It is not yet known how the Trump administration will decide to handle the BlackRock situation or who will lead the FDIC after the Republican takeover of the White House.
David Hollerith is a senior reporter for Yahoo Finance, covering banking, cryptocurrency and other areas of finance.
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