“BlackRock’s Chief Client Officer, Mark McCombe, recently wrote a letter to many of our states describing BlackRock’s position on energy investments with respect to our pension funds,” reads the letter to BlackRock CEO Larry Fink from Arizona Attorney General Mark Brnovich, also signed by 18 other states.
“Mr. McCombe’s letter contains many statements that appear to conflict with BlackRock’s previous public statements and commitments.”
That letter from McCombe was a response to inquiries from state fiscal officers, including Texas Comptroller Glenn Hegar, to evaluate the internal policies of financial companies in which public pension dollars are invested. Under Senate Bill (SB) 13, passed in 2021, the Texas legislature directed all state investments to be pulled from companies deemed to harbor fossil fuel divestment and sanctioning policies. Hegar will soon release his initial list of companies under the SB 13 directive.
“BlackRock’s past public commitments,” reads the letter from the attorneys general, “indicate that it has used citizens’ assets to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States.”
The joint letter gibes BlackRock for telling the public one thing and then doing another. McCombe’s letter states that BlackRock is “agnostic” on the direction of America’s energy sector, offering an array of opportunities for investment in fossil fuels, renewable sources, and more.
“But this claimed neutrality,” the states’ letter objects, “differs considerably from BlackRock’s public commitments which indicate that BlackRock has already committed to accelerate net zero emissions across all of its assets, regardless of client wishes.”
BlackRock’s website page on “sustainability” reads, “We believe that the transition to a net zero world is the shared responsibility of every citizen, corporation, and government.”
The letter continues, “BlackRock joined the Net Zero Managers Alliance which, among other things, directs members to ‘acknowledge that there is an urgent need to accelerate the transition towards global net zero emissions and for asset managers to play our part to help deliver the goals of the Paris Agreement.’”
ESG denotes the investments-focused movement to advance policies such as environmentalism, progressive social issues, and internal diversity standards by prioritizing capital toward companies advancing those ends at the expense of those objecting to it.
Currently, the most popular form of ESG activism is transitioning away from fossil fuel use — leaving oil, gas, and coal producers facing the tip of the spear — but it is also beginning to move against the way the agriculture industry operates.
Using its proxy voting power — the process by which asset managers cast company shareholder votes collectively on behalf of their customers — BlackRock took “voting action” against 53 companies “for lack of progress on climate.”
191 other companies were “put on watch” for the same reason.
The letter highlights a statement by the Glasgow Financial Alliance for Net Zero (GFANZ) steering committee, of which BlackRock is a member, which reads:
“The systemic change needed to alter the planet’s climate trajectory can only happen if the entire financial system makes ambitious commitments and operationalizes those commitments with near-term action…That is why we formed [GFANZ], to bring together over 450 leading financial enterprises united by a commitment to accelerate the decarbonization of the global economy.”
Asset managers by law must act solely in the best interests of their customers, requiring impartial stewardship of their money. Supporters of ESG argue it’s in the best interest of their customers for both personal financial and existential reasons.
An analysis by the Kenan Institute of Private Enterprise found that, “The evidence on investment returns is more ambiguous — some studies find the stock prices of companies with high ESG ratings outperform, but others find no measurable effects, and some even document lower monetary returns.”
The attorneys general argue that BlackRock is not actually looking out for the fiduciary best interests of their clients. The company not only maintains the opposite, but also says it isn’t divesting or sanctioning the fossil fuel industry.
Back in March, BlackRock President Rob Kapito denied such accusations made against his company by officials like Lt. Governor Dan Patrick, claiming the company manages $264 billion of investments in the oil and gas industry — less than 3 percent of its total $9.6 trillion of managed assets.
“Your letter was written in response to accusations that BlackRock may have violated one of these laws,” the letter posits further, pointing to BlackRock’s “numerous votes against companies for failing to meet disclosure standards that are not required by law.”
“As you may know, the definition of an energy boycott includes actions to penalize companies for failing to meet emissions standards beyond what is required by relevant law.”
The state attorneys general requested clarity from BlackRock on each action mentioned in the letter “that appear to have been motivated by interests other than maximizing financial return.”
“The time has come for BlackRock to come clean on whether it actually values our states’ most valuable stakeholders, our current and future retirees, or risk losses even more significant than those caused by BlackRock’s quixotic climate agenda,” it concludes.
The letter requests a response by August 19.
A copy of the attorney generals’ letter can be found below.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.