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June 2022
AAM Magazine
June 2022
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Analysis: BlackRock: bellwether or Judas goat?

By Paul Mackintosh   
May 18, 2022

BlackRock Inc. has long been credited with being one of the bellwethers in environmental and social responsibility in the asset management community. Successive letters to shareholders from Chief Executive Officer Larry Fink have been credited with shifting the entire global corporate mindset towards sustainability.

It's a shame then to see the US$10 trillion asset manager, the world’s largest, announce last week that it will be unlikely to support certain categories of shareholder resolutions aimed at sustainability goals. Significantly, these include calls to stop the financing of petrochemicals companies.

Ironically, Fink’s January 2022 letter to shareholders was already being hailed as having “raised the corporate stakes on climate change”, according to S&P Global, among others. “Few things will impact capital allocation decisions – and thereby the long-term value of your company – more than how effectively you navigate the global energy transition in the years ahead,” Fink wrote to investees.

BlackRock goes to great lengths in its investment stewardship bulletin to stress its continuing commitment to sustainability issues. But it also goes to equally great lengths to stress its fiduciary duties to investors, including “public and private pension plans, governments, insurance companies, endowments, universities, charities”.

All well and good, except that the bulletin chiefly seems to object to the “more prescriptive” climate change-focused shareholder proposals now being put forward following revised Securities and Exchange Commission guidance published in November 2021.

This kind of flip-flopping raises disturbing questions about how deep-bedded sustainable thinking actually is in corporate and Investment culture. We have been assured time and time again that the new long-term sustainable financial and Investment approaches are based on solid scientific and actuarial foundations that make climate risk a potentially intolerable burden for any new project or investment instruments that do not take them into account.

So where did all this deep thinking and irrefutable scientific proof go? Are asset managers and companies really ready to drop it at the first sign of a shift in the wind?

Banging the drum for fiduciary responsibility to institutional investors doesn’t really convince when the issue is that the companies you invest in today may kill your investors tomorrow, along with the rest of the planet. That also suggests an investment management community which, for all its claims, hasn’t quite broadened and matured its own thinking enough to really become the transformational change agent that we need in order to protect and survive.

Almost concurrent with the BlackRock statements, the Financial Times published a European Commission draft figure of 195 billion euros ($204 billion) of investment needed to shift the European Union away from dependence on Russian energy exports and towards a more sustainable energy mix. Isn’t that exactly the kind of long-term infrastructure opportunity that institutional investors need in order to achieve their own returns targets?

Perhaps the investment management community really does need to show more imagination – as well as more responsibility.