Wall Street is greenwashing finance. It has turned sustainable investment into little more than a PR stunt, and this undermines the fight against the global climate problem, according to Tariq Fancy, a former BlackRock chief investment officer.
Fancy, who resigned from his position in 2019 for family reasons, argues in in an opinion piece in the USA Today daily that Wall Street is playing tricks on the American people with its so-called pro-environment and sustainable investment policy. According to Fancy, Wall Street is “greenwashing” the American public instead of really focusing on addressing a system that is in dire need of change due to climate change.
‘I know, because I was there, in the heart of it,’ writes Fancy, who makes no direct reference to BlackRock but which in the past was blamed for failing to take the initiative in the fight against climate change - given its power as the world’s largest fund house.
No more than a marketing hype
‘Our message helped to convince us that the concept of doing social good was also good for the bottom line. But alas, that was all just hope,’ writes Tariq Fancy. ‘If you peel it off completely, it is nothing more than marketing hype,’ he argues.
The former CIO points out that many funds are rebranding so they can present themselves as ‘green’, without making any real changes to their investment policies. According to Fancy, ‘so-called ESG funds’ in the US continue to have exposure to oil companies and large clothing companies, both of which are guilty of large-scale pollution. He points out that US-registered funds are legally bound not to do anything that would jeopardise fund returns. Tariq Fancy concludes: to fix our system and avoid disaster, we need the state to adjust the regulations.
BlackRock turns green
BlackRock, which for years was a bit half-hearted about sustainable investing according to its critics, was finally completely converted last year as criticism grew. CEO Larry Fink has said he wants more of its funds to meet the requirements of SRI. Last year, according to the firm, 62% of investment funds complied with EU rules on ESG. This year it will be 70%. But measured by assets under management, only 17% met this requirement in 2020.
At the same time, however, inflows into ESG-related investments are growing very strongly. The growth rate is 18% per quarter in Europe, according to Morningstar. In the US, it is even more, but there is a significant gap to make up. No less than 82% of sustainable funds are registered in Europe, according to Morningstar.
As of March 10, the SFDR directive is in force in the European Union and aims, among other things, to combat “greenwashing” of investment products. This week BlackRock announced that it will vote against the re-election of directors at shareholders’ meetings if listed funds do not effectively combat risks relating to ‘natural capital’. These include deforestation, loss of biodiversity and poisoning of drinking water and oceans.