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Big Apple Bashes BlackRock ESG Response

ESG Investing

In recent weeks some state officials have pushed back on the imposition of ESG factors in state pension investment considerations—now another is pushing back on that pushback, criticizing BlackRock CEO Larry Fink for not taking a stronger pro ESG-stand.   

In a heavily footnoted eight-page letter to BlackRock CEO Larry Fink, New York City Comptroller Brad Lander the “trustee, the custodian, and the delegated investment advisor to the New York City Retirement Systems” has expressed concerns that BlackRock isn’t pushing hard enough on its commitment to reduce carbon emissions. BlackRock currently manages $43 billion for three of the Big Apple’s pension plans.

“BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and argue that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy,” he writes in the letter dated Sept. 21. “As a fiduciary cognizant of the risks of inaction, BlackRock must demonstrate a plan to use its position as the world’s largest asset manager, with all the corporate governance responsibilities that go along with that position, to move its portfolio companies to get their businesses in line with a net zero economy.”

Lander states that a letter penned by “the Attorneys General from Arizona, Nebraska, Kentucky, and 16 other states who wrote to BlackRock on August 4, 2022” are “waging a war of political distraction in the hopes of protecting the fossil fuel interests that have captured their states,” and comments that Texas Comptroller Hegar’s recent directive to boycott BlackRock “…irresponsibly jeopardizes the returns of Texas pension funds, and potentially raises costs for Texas taxpayers. But political theater cannot and must not guide fiduciary actions.”

But Lander says that in BlackRock’s Sept. 6 response[i] to the attorneys general, “BlackRock now abdicates responsibility for driving net zero alignment in its own portfolio by saying that it does not ask companies to set specific emissions targets, and that its participation in NZAMI does not mean BlackRock is setting or meeting any net zero targets.” He holds up for criticism that “BlackRock even goes so far as to tout its continued investment in fossil fuels—without specific net zero targets or commitments or any plan for a phased transition away from the very investments that increase carbon emissions—as somehow a necessary part of a transition to a green economy.”

Lander, after stating that the three NYC funds “cannot reach our net zero goals without the active support of all of our asset managers, starting with BlackRock, as our largest manager,” and makes three “asks”:

  • Publish an implementation plan that makes clear BlackRock’s commitment to achieving net zero across its entire portfolio, with concrete steps that detail how it intends to reach science-based targets on a specific timeframe, and clear mechanisms to regularly report on Scopes 1, 2, and 3 emissions for all assets in BlackRock’s portfolio.
  • Provide a detailed approach to keeping fossil fuel reserves in the ground and phasing out high-emitting assets.
  • Support climate action through transparent corporate engagement that requires disclosure of climate-related lobbying, works to end lending and insurance for new fossil fuel supply projects, and pushes for science-based targets at portfolio companies.

He concludes by citing the damage incurred by NYC in the wake of Hurricanes Ida and “Superstorm Sandy,” and then notes “for the City of New York, it is not only our retirement portfolios that are at risk, but the social and financial well-being of our city itself. There is no time to delay. That’s why we have made these net zero commitments. That’s why we take them seriously. That’s why we will be prudently reassessing our business relationships with all of our asset managers, including BlackRock, through the lens of our climate responsibilities.”

 

[i] “We do not, as suggested in your letter, dictate to companies what specific emission targets they should meet or what type of political lobbying they should pursue,” Blass said. “That is the role of the company’s management team and the board of directors — it is not the responsibility of minority investors such as BlackRock.”  

 

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