Stockholm (NordSIP) – Nordsip has been keeping an ESG-focused eye on BlackRock for some time, especially since CEO Larry Fink last year publicly encouraged the firm’s investee companies to move towards net-zero CO2 by 2050. Why the particular interest in BlackRock? USD 10 trillion in assets under management provide the answer. The world’s largest third-party asset manager is a crucial piece of the sustainability puzzle. The firm has the sheer scale needed to significantly influence positive change in the global economy as we try to mitigate climate change and meet other Sustainable Development Goals (SDGs). However, new revelations from independent think tank InfluenceMap and the Bureau of Investigative Journalism raise serious questions about BlackRock’s recent conversion to sustainability.
Does the left hand know what the right hand is doing?
The product of a Freedom of Information (FOI) request and published on March 9 in the UK’s Guardian newspaper, email messages between a Texas oil regulator and BlackRock staff appear to show that executive-level climate commitments may not be taken seriously enough at all levels of the organisation.
Some of the language used in the emails suggests an effort being made to downplay previous climate-related statements and reassure fossil fuel clients that it will be “business-as-usual” for now. This could have been explained in the context of the engagement policy adopted towards high-carbon sectors by many investors, but it seems no reference was made to the need to transition away from fossil fuels. Most tellingly, BlackRock staff do not contradict the regulator’s statement that it was “nice to hear that BlackRock didn’t mean – or no longer believes – many of the disagreeable things the company and […] Mr Fink have said about the oil and gas industry”.
Finance industry dragging its feet towards net-zero
BlackRock have denied that there is a contradiction between their public statements and private conversations with clients and regulators in the oil sector. However, these email interactions do not look good and have not gone down well with climate campaigners. Beyond BlackRock there is an ongoing, broader problem within the investment industry of people saying one thing and effectively doing another behind the scenes. This can take the form of voting against climate-friendly company resolutions or negative climate lobbying, as highlighted in Swedish public pension fund AP7’s 2020 report. Many banks are also helping to directly fund new fossil fuel projects, away from the public scrutiny of the listed securities markets.
Fossil fuels: exclude or engage?
BlackRock is large and resilient enough to take these negative revelations on the chin, but what can the manager do to convince doubters that they are serious about addressing the climate crisis? Company spokespeople have pointed to their fossil fuel policy of inclusion and engagement rather than divestment. This approach has been taken by many large investors, including the aforementioned AP7, the argument being that effective transition by the heaviest emitters has the strongest potential to rapidly align the economy with net-zero targets. Nevertheless, it should not be used as a smokescreen for a business-as-usual approach.
Put your money where your mouth is
The best answer BlackRock could present to these latest negative allegations would be the implementation of a robust and transparent engagement framework vis-à-vis the fossil fuel industry. With the weight of USD 10 trillion behind them, they have the capacity to influence and drive positive change in their portfolio companies. Regularly publishing detailed progress reports on transition initiatives would also help accelerate the process and create positive industry peer pressure. Instead of hoping to avoid further FOI revelations, BlackRock could bring this crucial debate out into the open and be seen to be leading the charge towards net-zero.
