BlackRock finds itself caught in a tug of war in US politics over its approach to sustainable investing.
On the one hand, there are Republican-led states that believe the world’s largest asset manager is hostile to the carbon-focused industry. On the other hand, there are Democrat-led governments that believe BlackRock is backtracking on its commitment to addressing climate issues.
The Republican-controlled states of South Carolina, Louisiana, Utah and Arkansas have announced plans to remove more than one billion euro worth of assets under management from the asset manager. The states refer to BlackRock’s ESG policies, which they say they do not agree with.
Sustainable and responsible investing, or SRI, has been on the rise globally since 2020 and has since attracted more than one thousand billion dollars in assets under management. BlackRock manages five of the 20 largest US SRI funds, according to media reports. This makes BlackRock the market leader in this field, according to Morningstar.
Fiduciary duty
Opposing the Republican critics are others, such as the city of New York. In late September, the city’s controller, who assists pension funds as custodian and trustee, addressed BlackRock’s top executive Larry Fink (photo) in a letter. In it, the official, Brad Lander, wrote that assessing and evaluating systemic risks due to climate change is part of an asset manager’s fiduciary duty.
He pointed out that the three New York City pension funds, representing 700,000 city pensioners and employees, want to achieve a climate-neutral portfolio by 2040. “But we cannot achieve that goal without an active partnership with our asset managers, starting with BlackRock,” Brad Lander, comptroller of New York city wrote in an eight-page letter. BlackRock manages over 40 billion dollars for the city’s pension funds.
‘Political distraction’
Lander pointed out that the 19 Republican states that wrote to BlackRock on 4 August are “waging a war of political distraction” in an attempt to defend the carbon interests of stakeholders in these states, such as the oil industry. BlackRock responded to the criticism in a letter on 6 September, saying it “distances itself from the emerging trend of politicising investment decisions, putting pensioners’ financial returns at risk.”
However, according to New York City, BlackRock is now distancing itself from its responsibility to align its carbon-neutral stance with its own portfolio by saying it does not ask companies to set specific emissions targets.
What is striking about the battle of directions between Republican and Democratic stakeholders regarding BlackRock is that both cite their fiduciary obligations to challenge the relationship with the asset manager. “We need to make sure the money is not used to drive a separate agenda that is different from our fiduciary obligation,” Utah Treasurer Marlo Oaks told the Financial Times.
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