Are we headed into greenhushing territory?
Silence might seem like a viable antidote to political noise, but it has its perils.
Do climate alliances have a raison d'être? The exits of asset managers from their net zero alliance and the withdrawal of bankers from theirs has prompted a frantic quest for an answer.
Part of that quest consists of working through scenarios – what might investment managers or banks do next, now that their alliances are under pressure from a Republican backlash?
Picture one such scenario – where erstwhile members of such alliances don’t change their position on climate risk all that much and their conviction in the financial prospects of climate solutions remains resolute. The only difference being that they now operate under a veil of silence and in their own individual capacities.
In other words, an era of greenhushing. Here's why a greenhushing scenario might seem like a probable candidate for what is to come.
Silent warriors
Greenhushing, or the act of ‘turning down the volume’ on net zero ambition, is hardly a new idea. South Pole, a consultancy, estimated that in 2022 one in every four surveyed companies was “going green, then going dark”. There is some precedent to the notion that companies could view silence as a viable antidote to political noise.
Under a greenhushing scenario, erstwhile members of climate alliances would be willing to turn down the volume - to avoid political attention - but unwilling to turn back the dial on decarbonisation.
When BlackRock announced its departure from NZAM, the company’s statement said, “our departure doesn’t change the way we develop products and solutions for clients or how we manage their portfolios”.
Vanguard too, made a similar claim. “This change in NZAM membership status will not affect our commitment to helping our investors navigate the risks that climate change can pose to their long-term returns”, the company’s statement read.
In the name of business
Therein lies the clue – no matter who occupies the White House, climate risk is still financial risk and climate solutions is still good business. To quote a notorious conservative catchphrase, “facts don’t care about your feelings”.
The world’s largest asset owners, a sizable clientele for asset managers, are still looking to deploy more capital in climate solutions over the next few years. By 2030 Dutch pension fund ABP – one of the world’s largest – plans to deploy €30bn in ‘impact investments’, €10bn of that is in climate solutions.
A climate solutions tilt is evident in the investment beliefs held by several other asset owners – from the UK’s Universities Superannuation Scheme and Border to Coast Pensions Partnership to Singapore’s sovereign wealth fund GIC and Australian superannuation fund Aware Super.
This increasing demand for climate-driven financial products is hard to ignore. There are mandates to be competed for and fees to be collected. Managers and banks who exit climate alliances probably know this all too well.
Lest we forget
Lastly, the recent turbulence around climate alliances is not unprecedented. Nor is the silence that might be part of the wider response. It has all happened before.
The Net Zero Insurance Alliance (NZIA), launched in 2021, fell apart in 2024 in the face of an anti-ESG backlash disguised as antitrust complaints.
Munich Re announced its exit from NZIA in December 2023, seemingly motivated by the rising antitrust litigation risk. There was nothing in its departure to suggest that the insurer’s climate plan now stood on shaky ground. The company’s 2023 sustainability report includes a commitment to phase out thermal coal from both investment and insurance portfolios.
AXA, which chaired the NZIA, also left the alliance but the group’s latest climate change report suggests its commitment to oil and gas investment restrictions, a long-term exit from thermal coal and a plan to increase green investment was largely unaffected.
The catch
Silence, however, is not without its perils. A greenhushing scenario comes with a cost. Climate change is a collective action problem and collective action through climate alliances goes a long way.
Alliances have had a vital role to play in disseminating not only target setting protocols and research methodologies but also a burgeoning, publicly visible pressure on members to reduce their fossil fuel financing. Perhaps that collective vision was the reason d’etre of climate alliances.
Take that away and the battle becomes harder to fight, particularly when emissions reduction outside a portfolio matters much more than it does inside it.
Managers and banks may choose to silently and individually fight that battle but whether the odds are still collectively in their favour, only time will tell.
