State Street Investment Management, one of the world’s largest investment managers, announced a significant change in its signatory status with climate-focused investment coalition the Net Zero Asset Managers (NZAM) initiative, pulling out its U.S. business from the group, with only its Europe and UK businesses remaining.
The move by State Street highlights the growing challenge facing global asset managers in dealing with increasingly disparate views over the role of ESG considerations in investment decision making, with political pressure in the U.S. leading some asset owners and funds to exclude managers with a sustainability focus and anti-ESG politicians even warning asset managers against considering sustainability factors, while European funds often require a more active sustainability focus in their mandate considerations.
State Street has found itself at the center of the anti-ESG attention in the U.S., including recently being targeted alongside its peers BlackRock and Vanguard in a multistate lawsuit accusing the asset managers of violating antitrust laws through their sustainable investment initiatives and involvement in climate coalitions.
Under pressure, each of the asset managers has been forced to pull back on their climate and sustainability-focused activities, with BlackRock and Vanguard exiting NZAM earlier, and each of the firms leaving or significantly reducing their participation in climate engagement coalition Climate Action 100+. The firms have notably also reduced their support for climate and ESG-related shareholder proposals.
The move away from climate-focused investing in the U.S., however, has had significant repercussions on the firms’ businesses in Europe. Earlier this year, for example, UK pension fund manager The People’s Pension (TPP) selected Amundi and Invesco to manage over $35 billion in assets that had previously been exclusively managed by State Street, with TPP explaining that the move represented a significant step towards aligning its portfolio with its stewardship approach and priorities. TPP had recently outlined its stewardship priorities as climate change, nature, and human rights, and setting expectations for asset managers to hold investee companies accountable for adhering to investee company expectations, and to implement net zero voting guidelines.
Similarly, Dutch pension fund PFZW recently announced that it did not renew a multi-billion dollar asset management contract with BlackRock, with PZFW’s fund manager PGGM explaining that it seeks asset manager that share its sustainability ambitions and active sustainability-focused stewardship and voting, and noting that “not all asset managers – particularly in the United States – share the same perspective.”
While facing growing pressure in the U.S., however, in a statement provided to ESG Today, a State Street spokesperson said that its decision to remain in NZAM in Europe was made “in response to client demand in that region.”
The spokesperson added:
“Many of our European clients have consistently expressed a desire for sustainable investing strategies, climate reporting and other sustainable investment-related services. We determined to redefine our membership in NZAM to our European entities in order to support those clients who have net zero investment goals and objectives.”
State Street was an early signatory in NZAM, joining the initiative in early 2021. The firm’s U.S. departure from NZAM immediately follows the coalition’s announcement of plans to resume its activities after a multi-month hiatus to adjust to its evolving political and regulatory environment.
NZAM announced in January the suspension of its primary activities, and the launch of a review of the initiative, citing “recent developments in the U.S. and different regulatory and client expectations in investors’ respective jurisdictions.”
In an update last week, NZAM announced that it will resume its target and implementation support activities and re-list its signatories on its website in January 2026, but that its new commitment statement will remove references to achieving net zero by 2050 “to reflect diverse jurisdictional realities and accommodate signatories from a wider range of markets,” while “signatories will continue to set individual targets, implement their own stewardship strategies, and report annually on their progress.”
In a statement by State Street, the investment manager said that its decision to leave only its Europe and UK businesses in NZAM was made following its review of the revised NZAM commitments.
State Street added:
“This redefinition of our NZAM signatory status will have no impact on our commitment to delivering sustainable investing solutions to our clients who hire us for our sustainable investment and reporting expertise and capabilities to help them achieve their net-zero goals.”
