BlackRock, the world’s biggest asset manager, is the latest Wall Street giant to ditch a global group of investment firms founded in 2020 to pressure companies to cut carbon emissions. On Friday, it announced it had left the Net Zero Asset Managers (NZAM) initiative.

BlackRock is part of a broader exodus from green finance groups that banks and investors launched a few years ago to show their commitment to fighting climate change. Now, with Republicans in control of Congress, President-elect Donald Trump set to take office and Republican-led states suing financial firms for their green stances, those banks and investment managers are abandoning their climate coalitions in droves.

How big of a setback is this for slashing carbon emissions? Experts say that financial firms are likely to continue what they were already doing to promote green investments. “A lot of this is just political show,” said Madison Condon, an associate professor at Boston University School of Law.

BlackRock said as much in a letter to its clients explaining its decision. Even after leaving NZAM, the company said that it planned to keep giving investors the option to put their money into climate-focused funds designed to nudge companies toward cutting emissions, and that it would continue tracking the risks climate change poses to the companies it invests in.

What does a climate alliance do?

The point of forming green finance groups was to nudge banks and asset managers to push the trillions of dollars they control toward companies that are working on cutting carbon emissions and away from those that contribute to climate change. In theory, that would create an incentive for climate action. Participating firms were supposed to set aggressive climate goals and regularly report on their progress.

“NZAM has successfully helped raise the level of ambition across investors globally and supported their progress as they have sought to navigate their own individual paths toward a decarbonizing economy in line with their long-term financial objectives and fiduciary duties,” a spokesperson for the initiative wrote in an email.

But from BlackRock’s perspective, its NZAM membership didn’t do much. “Our participation in NZAM did not impact the way we managed client portfolios,” the company wrote in its client letter.

Many of BlackRock’s U.S. peers have also backed out of climate groups. Over the past month, the six biggest U.S. banks — Goldman Sachs, Wells Fargo, Citi, Bank of America, Morgan Stanley and JPMorgan — left another climate group, the Net-Zero Banking Alliance, four years after they helped create it. Several of the biggest Wall Street giants abandoned a U.N.-backed sustainability alliance called the Climate Action 100+ last year.

But, despite these departures, the companies that BlackRock and its peers invest in are already factoring climate change into their decisions, whether or not they talk about it publicly or face pressure from investors, according to Lin Peng, a finance professor at Baruch College.

“Climate change is still an important part of how companies make decisions,” Peng said. “Real estate companies and insurance companies have to take into consideration how wildfires or sea level rise change their risk.”

A ‘chilling effect’ for green finance

While climate alliances didn’t affect how banks and investment firms operate, they left the companies more vulnerable to criticism and investigations from Republican officials, experts said.

In November, 11 Republican state attorneys general led by Texas sued BlackRock and other financial firms for allegedly colluding to raise energy prices by encouraging companies to mine less coal. In December, Republicans in the House accused BlackRock and other asset managers of forming a “climate cartel” to cut companies’ emissions at the expense of shareholders.

In both cases, officials pointed to groups like NZAM and the Climate Action 100+ as evidence that financial firms were colluding with each other in ways that violate anti-monopoly laws.

“Our memberships in some of these organizations have caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials,” the firm said in its letter.

Condon said it doesn’t matter much whether a bank or investment manager joins or leaves a climate alliance. But, she said, the backlash against BlackRock and its peers has created a “chilling effect” to discourage financial firms in the United States from taking a public stand on climate change.

In recent years, banks and investment firms, along with regulators at the Securities and Exchange Commission, have pushed companies to disclose more information about how climate change or the shift to renewable energy might affect their business. Oil and gas companies, for instance, might expect to sell less fuel in a world with more electric cars.

“If investment managers are chilled to the point where they can’t even acknowledge the green transition, this would clearly be a loss because the transition is happening,” she said. “With Trump being elected, we’re going see less interest in America to pressure companies for this type of disclosure.”

“That’s why that could be a significant step backward.”