The Largest Asset Managers Are Being Held to Their Own Words
BlackRock and Vanguard built years of credibility on climate commitments – pledges to push portfolio companies toward net-zero emissions, vote for climate-aligned board resolutions, and treat environmental risk as financial risk. Now, a growing number of institutional investors, state pension funds, and activist shareholders are asking both firms to explain the gap between those pledges and their voting records. The scrutiny is pointed, and the political crossfire makes it worse.
The pressure is coming from two directions simultaneously. Environmental groups and ESG-focused pension funds argue that BlackRock and Vanguard have quietly softened their climate stances to avoid confrontation with fossil fuel companies they hold major stakes in. At the same time, Republican-led state governments have accused both firms of weaponizing shareholder power to advance a political agenda at the expense of returns. Caught between two hostile audiences, the firms are discovering that a centrist position on climate investing satisfies almost no one.
How the Commitments Were Made – and What Has Shifted
BlackRock chief executive Larry Fink’s annual letters to CEOs became closely watched documents starting around 2020, when he placed climate risk at the center of the firm’s stated investment philosophy. The language was direct: climate risk is investment risk, and companies that failed to disclose emissions data or set credible transition plans would face shareholder consequences. Vanguard made similar noises, joining the Net Zero Asset Managers initiative in 2021 alongside hundreds of other global fund managers. Both firms used this positioning to appeal to institutional clients who faced their own pressure from beneficiaries on sustainability.
Then both firms began pulling back. Vanguard withdrew from the Net Zero Asset Managers initiative entirely in late 2022, citing a need to maintain independence and avoid taking political stances on behalf of its fund holders. BlackRock scaled back its support for climate-related shareholder resolutions, backing fewer proposals in 2023 and 2024 than in prior years. The firm argued that many of the resolutions had become overly prescriptive or redundant, but critics read the pattern differently – as a retreat under pressure from state treasurers threatening to pull billions in public pension assets from ESG-linked funds.
The Shareholder Resolution Battleground
Annual shareholder meeting season has become the main arena where these commitments are tested. Climate-focused resolutions – asking oil companies to align capital spending with Paris Agreement targets, or requesting that banks disclose financed emissions – require large asset managers to take a visible stance. When BlackRock or Vanguard vote against these proposals, or abstain, the decision carries outsized weight because of the sheer volume of shares both firms hold across virtually every publicly traded company of consequence.
Proxy voting records are public, and advocacy groups have become skilled at dissecting them. Analysis of recent proxy seasons shows both firms backing a smaller percentage of environmental and social resolutions than they did at the peak of their ESG rhetoric around 2021. That drop has been documented by proxy advisory tracking services, and it feeds a straightforward narrative: the firms made promises during a period when ESG branding was commercially useful, then retreated when political and client pressure made those promises costly.
The counterargument from both firms is that resolution quality varies widely, and blanket support for any proposal labeled “climate” would be irresponsible stewardship. There is some merit to that position. Some resolutions are drafted by advocacy organizations with goals that go beyond what a reasonable fiduciary standard would require, and asset managers do have a legitimate obligation to evaluate each proposal on its specific merits. The problem is that this reasoning is hard to distinguish, from the outside, from simple capitulation to political pressure.
The firms are also navigating a legal environment that has shifted. Several Republican-led states have passed or proposed laws restricting public fund managers from considering ESG factors when making investment decisions, framing it as a breach of fiduciary duty. Lawsuits and state-level investigations have created a legal deterrent that did not exist when the original climate commitments were made. Both BlackRock and Vanguard manage assets for state pension funds in states that have explicitly hostile positions on climate-focused investing, and the tension between retaining those mandates and honoring environmental commitments is not theoretical.
The Client Pressure Equation
Institutional clients sit at the center of this conflict. Large public pension funds in California, New York, and several European countries have explicit mandates to consider climate-related financial risk, and they have been vocal about expecting their asset managers to do the same. These clients represent enormous pools of capital, and losing their mandates would be commercially painful. But the state-level opposition in places like Texas and Florida – where treasurers have moved to pull public money from funds deemed overly ESG-focused – creates an opposing financial pressure of comparable scale.
BlackRock has attempted to square this circle partly through its “voting choice” program, which allows certain institutional clients to direct how their shares are voted on proxy resolutions rather than deferring to BlackRock’s default position. The idea is that the firm acts as a neutral platform rather than a political actor. The practical effect, critics argue, is that it diffuses accountability without resolving the underlying tension about what the firm actually believes regarding climate risk and investor obligations.
What Accountability Actually Looks Like
The fundamental question is whether asset managers of this scale can be held meaningfully accountable for soft commitments made in letters and press releases. There is no contractual mechanism forcing BlackRock or Vanguard to vote a particular way on climate resolutions. Shareholders in their own funds – overwhelmingly retail investors with no leverage – have no direct recourse when proxy behavior shifts. The accountability loop, such as it is, runs through institutional clients who can pull mandates, and through reputational consequences that move slowly.
Some European institutional investors have begun signaling that this slow accountability loop is not sufficient. A handful of large pension funds have started requiring more explicit and enforceable proxy voting commitments as conditions of mandate agreements, rather than accepting general ESG policy statements as adequate assurance. That approach is still a minority practice, but it points toward a direction where climate commitments become contract terms rather than aspirational language.
There is also a broader question about whether passive investing and meaningful climate engagement are structurally compatible. Both BlackRock and Vanguard derive the bulk of their assets under management from index funds that hold positions in every major company in a given index, including the largest fossil fuel producers. Selling those positions is not an option for a passive fund – the whole product is tracking the index. That structural constraint means the only lever available is shareholder engagement, which is precisely the lever both firms appear to be pulling back on. The passive fund model that made both firms dominant was never designed with activist stewardship in mind, and the climate commitments that both firms made may have overstated what that model is capable of delivering.
