BlackRock’s European clients urged to act as Fink signs off as a long term asset manager

As usual, Larry Fink’s annual letter to its clients gives a strong indication of BlackRock’s direction of travel. It’s not at all encouraging. The 2023 edition published on March 15th confirms that BlackRock will not act consistently in favor of addressing long-term issues including the climate crisis. As BlackRock was among protesters’ targets yesterday in Vienna ahead of the European gas conference, Reclaim Finance calls on BlackRock’s clients, especially the many European pension funds with climate targets, to review their mandates and find other asset managers that are serious about driving stewardship and investments to accelerate the transition.

BlackRock is neglecting systemic climate risks, and asset owners’ interests

  • BlackRock propagates a misguided and short-term view of climate issues. 

When Larry Fink paints gas as a bridging fuel (1), he misrepresents the facts and fails to provide his clients with the information they need to identify their long term interests. The IEA projected in its 1.5°C scenario the end of the development of new gas fields and LNG terminals in order to reduce gas production by 22% by 2030. Mr. Fink must tailor BlackRock’s investment choices accordingly. This letter is the last example of many public statements by BlackRock propagating a misguided view of climate issues (2).

  • BlackRock stands ready to invest pensions into companies destroying savers’ future. 

By insisting in his letter that it is not the role of an asset manager like BlackRock to engineer a particular outcome in the economy”, Fink is clear that BlackRock will always agree to invest its clients money in the fossil fuel developers that increase long-term systemic risks. When he urges people to invest for their retirements but stands ready to invest their pensions into companies destroying their future, Fink does not have the long term interest of his clients in mind. Such investments threaten the fundamental interests of clients: they worsen the climate crisis which in turn increases financial risks related to climate and threatens our living conditions. It’s time to choose: Blackrock cannot aspire to be the ‘world’s leading expert’ in net zero while massively supporting fossil fuel expansion (3) including via its voting advice.

  • BlackRock has a poor voting approach

Larry Fink touts the merits of BlackRock’s “voting choice” program. But such new tools, that allow more of its clients to cast their votes, must not sideline the fact that an asset manager’s default engagement positions and voting decisions remain key. As most asset owners won’t have time or resources to provide their own votes for most companies, they will trust BlackRock to vote on their behalf, meaning that companies will remain primarily influenced by BlackRock’s default positions. Therefore BlackRock’s default voting positions are the heart of the issue and the buck should not be passed to its clients. And while BlackRock might have improved its voting decisions in 2020 and 2021 (e.g. by backing more climate shareholder resolutions), this did not last long as the 2022 AGM season confirmed  and even showed the backward steps BlackRock has taken (4).

BlackRock’s European clients endanger citizens pensions

Many European pension funds, such as Scottish Widows, PensionDanmark or FRR (5), are BlackRock clients. If they have the long term interest of their clients in mind, they must ensure their asset managers’ actions and public discourse help encourage the development of the policy frameworks and economic incentives that are needed to create the systemic shifts that would limit warming to 1.5°C (6). They should also ensure, as a minimum, that their asset managers don’t slow or obstruct the transition. Unlike a growing number of European asset managers, BlackRock still invests without any restrictions in companies that develop new coal mining and power plant projects and still fully backs the management of such companies, like Glencore (7), through its voting. And its stewardship activities also slow down the transition: Blackrock voted against corporate action to report on and align lobby activities on climate and related topics at several companies in 2022 (8).

The clear conclusion is that Blackrock has failed to withstand political pressure from fossil fuel interests in the US, and so asset owners cannot rely on Blackrock to help them meet their climate targets. They should give Blackrock a clear deadline to shape up and take a stronger stance against fossil fuel expansion, or lose them as a client. 

Notes:

  1. For example, Fink’s letter states that “fossil fuels like natural gas, with steps taken to mitigate methane emissions, will remain important sources of energy for many years ahead”.
  2. Recent public statements by BlackRock and its CEO, via interviews with major European media and in response to the UK’s Environmental Audit Committee, propagate a misguided and short-term view of climate issues and contradict their own advice on managing climate risks.
  3. With holdings of US$191 billion in 173 different fossil fuel developers, with 89% by value in oil and gas, is the biggest investor worldwide in such companies (as of Sept. 2022). Source: “Throwing Fuel on the Fire: GFANZ financing of fossil fuel expansion” published by Reclaim Finance and partner organizations, January 17th 2023.
  4. Analysis of BlackRock’s votes in 2022 reveals less support for key climate shareholder resolutions than the previous year, including opposing the same resolutions it had supported in 2021 (e.g. at Chevron, BP and Equinor AGMs), more support for directors at the U.S.-based companies flagged by the CA100+ initiative as focus companies for engagement. BlackRock supported 98.2% of directors in 2022 and support for almost all company’ climate plans, regardless of their quality. BlackRock has gone from 100% approval for ‘Say on Climate’ (SoC) proposals in 2021 to a slightly lower 97.5% in 2022. BlackRock even voted in support of companies’ climate plans that leave space for the development of new coal projects.
  5. While the list of BlackRock clients is not made public, some clients can decide to be transparent and disclose the list of their asset managers publicly.
  6. As outlined in the Net Zero Asset Owner Alliance’s paper on “The Future of Investor Engagement: A Call for Systematic Stewardship to Address Systemic Climate Risk”, 2022.
  7. Glencore’s ‘climate’ progress report was approved by BlackRock in 2022 despite CA100+ flagging and despite the 9 new coal mines/expansion of existing mines in Australia and South Africa that Glencore is involved in.
  8. For example, BlackRock voted against the lobbying related resolutions filed in 2022 at the AGMs of FedEx Corporation, Alphabet Inc, Woodside Energy Group Ltd., United Parcel Service Inc., Santos Ltd., Honeywell International Inc.

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2023-06-06T14:24:12+02:00