Widening Divide in Sustainable Investment Approaches
The gap between European and U.S. strategies for sustainable investing became more pronounced this week as the Dutch pension fund Pensioenfonds Zorg en Welzijn (PFZW) decided to withdraw an impressive US$17 billion from stock funds managed by BlackRock. The decision stemmed from concerns over BlackRock’s inadequate management of climate-related risks. PFZW announced its commitment to a new investment strategy that prioritizes financial performance, risk management, and sustainability equally.
Victory for Climate Advocacy
The Dutch climate advocacy group Fossil Free Netherlands hailed this decision as a triumph for its Break with BlackRock campaign, initiated in January when BlackRock exited the Net Zero Asset Managers alliance. The campaign saw more than 2,500 individuals reaching out to their pension funds, urging them to sever ties with BlackRock. The organizers emphasized, “BlackRock is one of the world’s largest contributors to the climate crisis,” pointing out that financial losses can occur when climate-related disasters impact investments.
BlackRock’s Changing ESG Stance
As the world’s largest asset manager, BlackRock reported a staggering US$11.6 trillion in assets under management by the end of 2024, which includes $1 trillion allocated to sustainable and transition-related investments. Despite CEO Larry Fink’s previous advocacy for environmental, social, and governance (ESG) investing, the firm has significantly reduced its backing for ESG-focused proposals from activist investors since 2021. Support for such proposals plummeted from 47% in 2021 to just 2% this year. A BlackRock spokesperson affirmed that the firm remains committed to helping clients achieve their sustainable investment objectives.
Continued Emphasis on Sustainability in Europe
While U.S. investors are increasingly withdrawing from funds that incorporate ESG considerations, many Dutch pension funds still view sustainability as a viable long-term investment strategy, according to reports from Reuters. Another Dutch pension fund, PME, is reportedly reassessing its partnership with BlackRock, signaling a trend among European investors who are raising their standards for climate risk management.
Market Signals for Asset Managers
Sustainability advocates quickly interpreted PFZW’s decision as a market signal indicating that investors are demanding more from money managers regarding climate risk and corporate social responsibility. Danny Takhar, business development manager at the sustainable investment platform Vericap in Vancouver, noted, “Pension funds are sending a clear message – asset managers must enhance their climate stewardship, or they risk losing significant mandates.”
The Importance of Risk Management
Others emphasized the crucial relationship between ESG strategies and the management of climate and transition risks. Sigrid Carstairs, a sustainability expert at Swedish renewable energy firm Eolus, commented, “Sustainability is risk management. This is not just about aesthetics or marketing; it’s about fulfilling responsibilities as capital stewards.”
Similar Moves in Other Regions
In February, the People’s Pension in the UK executed a comparable strategy, transferring US$35.3 billion in assets from State Street in the U.S. to other firms aligned with ESG and net-zero goals. Mark Condron, the chair of trustees for the fund, explained that the broader aim is to balance strong financial returns with responsible investment practices.
Growing Disparity Between Regions
The divide between Europe and North America in sustainable investing appears to be widening. A recent survey by the Financial Times revealed that 70% of European institutional investors believe that withdrawing from ESG commitments negatively impacts their perception of an asset manager, in contrast to only 47% of respondents from North America.
