As Republicans prepare to take over all of Washington, the world's largest money managers are trying to avoid some political headaches.
BlackRock Inc. (BLK) withdrew from the U.N.-backed climate group’s Net Zero Asset Managers Initiative (NZAM) late last week, after several Wall Street banks pulled out of an affiliate just weeks before Donald Trump took office. organize. To the White House again.
BlackRock has also been given more time to resolve its standoff with the Federal Deposit Insurance Corporation (FDIC) over its stake in Bank of America, ensuring the dispute will unfold within the first months of Trump 2.0.
The $11 trillion financial giant has been the target of Republican attacks over “woke” investing for years, with Republicans concerned about whether BlackRock’s large holdings in corporate America would force companies to adopt environmental, social and governance (ESG) ) standard. BlackRock CEO Larry Fink is abandoning the politically controversial acronym.
Democrats have also been skeptical for years about whether BlackRock's influence posed a risk to the financial system.
BlackRock, which reports fourth-quarter earnings on Wednesday, will have to contend with all of these political challenges as Republicans take over the White House and Congress — a measure of control that could cause new trouble for the money management giant.
The House Judiciary Committee, led by Ohio Republican Jim Jordan, named BlackRock, Vanguard and State Street in a report last month that it found financial industry “Evidence of collusion and anti-competitive behavior” to “enforce aggressive ESG – a goal for U.S. companies”.
The report also criticized the Financial Environment Coalition, saying they had created a so-called "climate cartel".
Last Thursday, BlackRock confirmed it was withdrawing from a financial climate coalition called the Net Zero Asset Management Initiative (NZAM).
The group's NZAM members have pledged to use their influence in the financial sector, such as through proxy votes to support corporate boardroom climate initiatives, to help achieve net-zero carbon emissions by 2050.
"Our membership in some of these organizations has led to confusion about BlackRock's practices and exposed us to legal investigations by various public officials," Bloomberg quoted BlackRock as telling clients in a letter.
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 its activities pending a review.
It added in the note, "Recent developments in the United States and the differing regulatory and client expectations in investors' respective jurisdictions have led NZAM to initiate a review of the scheme to ensure NZAM remains appropriate for it in the new global context." Purpose."
Another delicate political situation BlackRock now faces is its resistance to the Federal Deposit Insurance Corporation's push for greater regulation.
The FDIC has been giving BlackRock until Jan. 10 to sign a "passive agreement" that would subject the money manager's holdings to FDIC-regulated lenders to more inspections, delaying the original deadline of Dec. 31 this year. day deadline.
The agreement the FDIC wants BlackRock to sign is similar to one announced with Vanguard, which imposed new compliance requirements when a management company holds more than 10% of all outstanding shares of an FDIC-regulated bank.
The aim is to reassure bank regulators that the giant money manager will remain a "passive" owner of banks regulated by the Federal Deposit Insurance Corporation and will not exert control over bank boards. BlackRock currently has only such an agreement with the Federal Reserve.
BlackRock spent much of 2024 denying it exerted improper control over the company through its investment management activities.
On Friday, BlackRock's deadline to respond to the FDIC's information request was extended to February 10, pushing the standoff toward the start of Trump's new presidential term.
In effect, BlackRock will either have to respond to the FDIC's updated information request to rebut the presumption that it controls more than 10% of FDIC-regulated bank holding companies, or sign a "passive agreement" to do so, said one person familiar with the matter. .
It's unclear how the Trump administration might decide to handle the BlackRock situation or who will run the FDIC with a Republican in the White House.
David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrency and other financial areas.
Click here for an in-depth analysis of the latest stock market news and events affecting share prices
Read the latest financial and business news from Yahoo Finance