The two US asset management giants, Blackrock and Vanguard, have announced a pause in their engagement activities – i.e. their dialogue with companies – a pause that lasted just a few days for Blackrock. This measure follows the introduction of a new rule by the US financial regulator, the Securities and Exchange Commission (SEC), which imposes reporting constraints on investors carrying out engagement activities with US companies, including on ESG issues. Given that these two investors have made little effort to credibly engage companies, particularly on climate change, these new transparency requirements could be nothing more than a pretext for halting or slowing down their already limited activities. Reclaim Finance is calling on the clients of these investors to take action. Since climate risks are threatening their portfolios, and they have taken climate commitments, it is in their interest to ensure that engagement activities continue and are stepped up to limit these risks, or else to change managers.
In recent years, anti-ESG attacks from the United States have encouraged asset managers to give up any consideration of ESG issues, including climate risk, arguing that it does not fall within the fiduciary responsibility of investors. Yet climate change does represent a systemic risk that will have negative consequences for investment portfolios, and the extent of these consequences depends on the climate action taken today.
New rules threaten the ESG engagement activities of investors
On February 11, the SEC published a new rule which considers that the engagement activities of asset managers who own more than 5% of a US company constitute an attempt to influence or control those companies [1]. This new categorization subjects these asset managers to additional, more constraining reporting, which previously only concerned so-called ‘activist’ investors or hedge funds. However, the main goal of activist investors is to take control of a company, whereas the goal of shareholder engagement is to influence the practices of a company, to bring them into line with best practice or environmental or social standards. Both approaches may touch on governance issues, but their goals are quite different, with the latter aiming to strengthen companies over the long term through better management of risks and their impact.
Even if ESG engagements are not the only ones affected by this new rule, the SEC appears to be bowing to pressure from the anti-ESG movement by increasing supervision of investor engagement activities. The SEC’s announcement is therefore a very bad signal for climate action by asset managers.
A disproportionate reaction to a simple disclosure requirement
In reaction to this new rule, Blackrock and Vanguard announced a temporary halt to their planned meetings with companies, which only lasted a few days for Blackrock [2]. However, Blackrock’s and Vanguard’s reactions appeared disproportionate in the face of the constraints imposed by the SEC, which consist solely of providing additional reporting and are therefore a matter of transparency. The SEC does not prevent asset managers from continuing their engagements with companies. Blackrock and Vanguard have voluntarily decided to cease temporarily their engagement activities, which were already very limited, particularly on ESG issues.
Blackrock and Vanguard’s climate engagements have historically lacked credibility
Blackrock and Vanguard were far from the top of the class when it came to climate action. The two managers are regularly presented as the main investors in companies developing new fossil fuel projects, and unconditional supporters of these companies through their votes. A recent analysis by Reclaim Finance, which compares the climate practices of major asset managers, shows that Blackrock has invested more than $1.7 billion in recent fossil developer bonds, and Vanguard more than $1.9 billion, while bonds represent one of the main sources of funding for these companies. And the two investors have voted in favour of more than 90% of the actions of the boards of directors of these companies.
Blackrock and Vanguard have also moved away from international climate alliances. Vanguard left the Net Zero Asset Managers (NZAM) initiative in 2022 and was never a member of the Climate Action 100+ (CA100+) collaborative initiative. Blackrock left NZAM at the beginning of 2025, and only its international division remains a member of CA100+ since February 2024.
Their reactions to the SEC’s new rule are therefore above all a symbol of the retreat of US asset managers on ESG issues.
A threat to the interests and the climate commitments of their clients
By entrusting their investments to asset managers, their clients, known as asset owners, also delegate engagement activities. Shareholder engagement helps to mitigate the systemic risks and therefore to protect portfolios. Engaging with companies to accelerate their transition is an integral part of the fiduciary duty of investors, since the consequences of climate change generate losses for the economy as a whole, as we saw with the recent fires in Los Angeles [3]. Climate risks particularly affect long-term investors, whose vulnerability to the effects of climate change will increase in proportion to the level of global warming.
Besides, all asset owners have a major climate responsibility. They hold significant substantial portions of capital, which give them the ability to drive financial flows and therefore to support the transition or not. Many of them have made climate commitments, notably as part of the Net Zero Asset Owners Alliance (NZAOA), where they have pledged to decarbonize their investment portfolios and achieve net zero emissions by 2050. These commitments are now threatened by the measures announced by Blackrock and Vanguard.
Blackrock and Vanguard clients should therefore hold their managers accountable. To protect their interests, they need to ensure that their engagement activities continue in the case of Vanguard which still pauses its activities, and are strengthened to align with the recommendations of climate science for both investors.
Some asset owners have already asked their managers to do more. A group of UK asset owners representing over $1.5 trillion in investments have recently called on their managers to develop a robust engagement strategy to address climate risks [4]. Others are beginning to stop working with managers for lack of proper consideration on ESG issues, such as UK pension fund The People’s Pension, that recently announced it was withdrawing £28 billion from State Street because of its ESG retreat [5].
It is urgent and essential that the clients of asset managers ensure that their managers credibly integrate climate risks into their activities, both in their engagement activities, including their votes, and in their investment practices. In the absence of guarantees, it is imperative that clients change asset managers in favour of those who take concrete climate action, in order to protect their interests.
