BlackRock responded today to a recent inquiry from a group of Republican state attorneys general about whether it, one of the largest investors in energy companies, boycotts fossil fuels.
In summary, the world’s biggest asset manager said no, it does not, even if engagement campaigns with oil and gas companies fit with states’ working definitions of “boycott”.
BlackRock, which manages about $8.5trn in pension assets, has found itself in the crosshairs of conservatives who are waging a war on ESG. States such as Texas have singled out the company in their attempts to ban sustainability considerations for any publicly-invested money.
That might seem like an unlikely position for what is likely the biggest investor in Texas energy companies — but BlackRock is also a massive presence in the US sustainable investing business. The vast majority of its funds and ETFs are not ESG-themed, but its products that are considered sustainable account for 22% of assets in US sustainable funds, according to data from Morningstar.
“BlackRock does not boycott energy companies or any other sector or industry. As we have noted previously, BlackRock, on behalf of our clients, is among the largest investors in public energy companies, and has hundreds of billions of dollars invested in these companies globally, with approximately $170 billion invested in US companies,” the company said in its response to the attorneys general. “In the past few years alone, we have invested in a broad range of energy ventures around the world and across the United States, including in some of your states.”
What’s in a name?
Much as the definition of “sustainable” or “ESG” might be up for debate, so too might that of “boycott”.
As the Republican attorneys general wrote to the asset manager, it isn’t just not buying something that amounts to a boycott.
“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 letter to BlackRock last month noted.
The letter took issue with the company’s votes on shareholder resolutions that in some cases asked public companies to provide more greenhouse gas emissions disclosure than they currently do. Proxy votes on that topic have become common, and the Securities and Exchange Commission could soon require many public companies to provide that information.
“BlackRock appears to be acting for a social purpose that may have a financial benefit if certain improbable assumptions occur,” the attorneys general wrote. “If BlackRock were focused solely on financial returns, its conduct would likely be different.”
The letter raised questions about the company adhering to its fiduciary duties to clients and even floated antitrust allegations, stating that “BlackRock’s actions appear to intentionally restrain and harm the competitiveness of the energy markets.”
Its response
Although the company participates in various groups focused on sustainability, including Climate Action 100+ and Net Zero Asset Managers Initiative, it noted that it does not coordinate its voting activity or investing decisions. It has also allowed pensions to vote their own shares in shareholder resolutions.
“Rather, we make such decisions independently and in the long-term economic interests of our clients,” BlackRock stated. The company has long said that it views climate risk as an investment risk.
Further, its engagement with energy companies has focused on financial risk and return, which can include climate issues, it noted.
“Your letter suggests that voting against management on climate-related issues could fit within certain states’ statutory definitions of boycotting because it may constitute ‘an action to penalize’ an issuer for ‘failing to meet emissions standards beyond what is required by law,’” BlackRock wrote.
“But our votes are not cast to ‘penalize’ companies. Quite the opposite: our votes are cast with a view to achieving the best long-term value for those companies and their shareholders.”
