Key points:
- The global retreat from ESG, driven by political pressure and fear of scrutiny, risks short-term gains at the expense of long-term client value and economic resilience.
- Fundamental risks from climate change, biodiversity loss and weak governance are intensifying, making responsible stewardship more vital than ever.
- As others step back, we remain focused on supporting companies that deliver lasting value for society and challenging those whose actions threaten future prosperity.
On 10 January 2025, Blackrock announced its withdrawal from the Net Zero Asset Managers’ initiative (NZAM). Three days later, NZAM suspended itself, pending a review [1]. Both decisions followed a letter from the US House Judiciary Committee in December to over 60 asset manager members of NZAM. It suggested that they were operating a "woke ESG cartel" by facilitating collusive action to promote “radical environmental, social and governance goals on American companies".
As we are witnessing across many industries, the ripple effects from President Trump’s return to the White House are global. In asset management, proclamations of sustainability or net zero are being scrubbed from marketing material with little sign of regret. To some, it seems sustainability was often a convenient pastime that has run its course.
While greater accuracy in ESG claims has been long overdue, should we worry that the backlash against sustainability is giving way to a new era of ‘anything goes’? Are asset managers quietly abandoning efforts to promote enduring economic prosperity by supporting action on climate change, biodiversity, or effective and accountable boards, because they fear unwanted scrutiny from anti-woke campaigners?
There is evidence to suggest that the pullback from ESG commitments is more than cosmetic. According to ShareAction’s latest review of asset managers’ voting in 2024 [2], support for shareholder resolutions on environmental and social issues hit an all-time low. Just 1.4% of resolutions received majority support compared with almost a quarter in 2021. The shift is starkest among the four largest managers – Blackrock, State Street, Vanguard, and Fidelity (see chart 1). Vanguard supported no shareholder resolution last year. Together these managers accounted for an average 17% of the reviewed companies’ shareholder base. They have the power to make a difference through their voting.
The fundamental forces are unchanged
The trouble with an approach of short-term self-preservation by asset managers is that it risks sowing the seeds of long-term client harm. This is because the fundamental forces shaping our lives have not changed; if anything, they are getting worse.
Climate change is accelerating. In January, the World Meteorological Organisation confirmed that we have breached the safety threshold of 1.5°C above pre-industrial times over the past 12 months. 2024 was the warmest year on record, making the past decade the hottest ever [3].
While the consequences of our warming planet cannot be predicted with certainty, scientists at the Intergovernmental Panel on Climate Change (IPCC) are unequivocal in outlining the dangers: unabated climate change is likely to have dire consequences for humanity. It is worth reading the extract from the IPCC's most recent Assessment Report in 2022 in the box below.
IPCC summary for policymakers
The following is an extract from the IPCC’s 6th assessment report, published in 2022:
Concurrent and repeated climate hazards occur in all regions, increasing impacts and risks to health, ecosystems, infrastructure, livelihoods and food (high confidence). Multiple risks interact, generating new sources of vulnerability to climate hazards, and compounding overall risk (high confidence). Increasing concurrence of heat and drought events are causing crop production losses and tree mortality (high confidence).
Above 1.5°C global warming increasing concurrent climate extremes will increase risk of simultaneous crop losses of maize in major food-producing regions, with this risk increasing further with higher global warming levels (medium confidence). Future sea level rise combined with storm surge and heavy rainfall will increase compound flood risks (high confidence).
Risks to health and food production will be made more severe from the interaction of sudden food production losses from heat and drought, exacerbated by heat-induced labour productivity losses (high confidence). These interacting impacts will increase food prices, reduce household incomes, and lead to health risks of malnutrition
and climate-related mortality with no or low levels of adaptation, especially in tropical regions (high confidence).
Risks to food safety from climate change will further compound the risks to health by increasing food contamination of crops from mycotoxins and contamination of seafood from harmful algal blooms, mycotoxins, and chemical contaminants (high confidence).
Source: IPCC
The World Wildlife Fund’s latest report on biodiversity is equally alarming [4]. Between 1970 and 2020, the average size of monitored wildlife populations shrank by 73%, with some regions more severely affected. Habitat degradation and loss, made worse by climate change, are raising the risk of irreversible tipping points. The Amazon rainforest, for example, could enter a ‘doom loop’ if 20% to 25% is destroyed – accelerating climate change as the ‘lungs of the world’ disappear. Currently, around 14% to 17% has been deforested.
Turning to social trends, polarisation and mental health problems are rising as technology increasingly shapes our lives. While the new Netflix series Adolescence highlights
the issue (as did its 2020 predecessor The Social Dilemma), a growing body of research backs up the concerns. In June 2024, the US Surgeon General called for warning labels on social media platforms. In September 2024, the World Health Organisation underlined growing evidence of mental health consequences for children [5].
This is not to downplay the many benefits of connectivity and digital tools – but the dangers increase when we are not alert to the risks.
When it comes to governance, the breakdown of established norms is eroding trust and raising the risk of conflict – not just between nation states but also between companies and their shareholders. A striking example was ExxonMobil’s decision to sue its shareholder Arjuna Capital last year for filing a shareholder resolution on net zero alignment. The chilling effect on shareholder engagement has been palpable [6].
Short-term gain raises risks of long-term pain
The problem is that turning a blind eye to these trends may feel liberating in the short term but does not make them go away. As investors roll back scrutiny, corporates feel emboldened to dial back their own environmental or social commitments. What began in the US is already spreading to Europe and beyond.
ExxonMobil may have gone further than peers in suing a shareholder, but European majors have hardly held the line on sustainability. Some big names have been accused of
weakened climate targets under the guise of remaining competitive. Unilever, one of the largest global users of plastics, has delayed its goals – reducing virgin plastic use by
30% by 2026 instead of the previously stated 50% by 2025 [7]. Following the exit of US banks from the Net Zero Banking Alliance, HSBC announced in February it was abandoning its 2030 net zero operational target [8].
In some ways the European playbook is worse. Many companies continue to promise sustainability, while providing false comfort and cover for inaction.
So, despite little change in the fundamental global trends, investors and corporates appear increasingly in lockstep – either abandoning core sustainability commitments or going silent; hunkering down until the dust settles. Either way, we believe the world and investors will be worse off.
Supporting society, not harming it
Against this backdrop, our stewardship philosophy remains firm. Our long-term ownership mindset is rooted in the understanding that the world is interconnected. Activities
that prosper by imposing uncompensated costs on others degrades the system, and this will ultimately undermine future prosperity. We believe that investing in a way that
supports society, rather than harming it, offers the best path to long-term financial performance and better outcomes for our clients.
This does not mean every investment is perfect from a stewardship perspective. Critical to our approach is engagement with companies and others to support sustainable behaviour, while challenging harmful practices.
Stewardship suffers in silence
The post-war political order is breaking, and we do not yet know if, or where, a new equilibrium will be established. However, the future doesn’t just happen to us – it is shaped by us. As investors, we have a key role and responsibility to act in ways that serve our clients’ long-term interests. We believe that this will not be achieved by ignoring
major social and environmental trends, or by neglecting good governance. As we see peers stepping away from stewardship, we want to reassure our clients that we remain
committed to speaking out on the issues that matter.
[1] www.sarasinandpartners.com/stewardship-post/our-commitmentto-
sustainable-investment-outcomes-net-zero-asset-managersnzam-
initiative/
[2] www.shareaction.org/reports/voting-matters-2024
[3] https://wmo.int/news/media-centre/wmo-confirms-2024-warmestyear-
record-about-155degc-above-pre-industrial-level
[4] www.worldwildlife.org/publications/2024-living-planet-report
[5] www.europarl.europa.eu/RegData/etudes/ATAG/2024/762422/EPRS_
ATA(2024)762422_EN.pdf
[6] You can read our statement on the Exxon case at https://
sarasinandpartners.com/stewardship-post/corporate-litigationrisks-
weaker-board-oversight
[7] www.unilever.com/news/news-search/2025/unilever-sees-earlysigns-
of-progress-on-sustainability-goals/
[8] www.hsbc.com/who-we-are/our-climate-strategy/our-netzero-
transition-plan
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