Big Apple denounces BlackRock ESG response

Over the past few weeks, some state officials have pushed back on forcing ESG factors into state pension investment considerations — now another is pushing back on that pushback, criticizing BlackRock CEO Larry Fink, for not taking a stronger pro ESG stance.

In an eight-page letter with extensive footnotes to BlackRock CEO Larry Fink, New York City Comptroller Brad Lander, the systems “trustee, custodian and delegated investment adviser New York City Retreat” expressed concern that BlackRock is not pushing hard enough on its commitment to reducing 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 assert that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy” , he wrote in the letter dated September 21. “As a fiduciary aware 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 come with that position, to move its portfolio companies in order to bring their business into a net-zero economy.

Lander says a letter authored by “the attorneys general of Arizona, Nebraska, Kentucky and 16 other states who wrote to BlackRock on August 4, 2022” is waging a war of political distraction in hopes of protecting fossil fuel interests that captured their states,” and comments that Texas Comptroller Hegar’s recent directive to boycott BlackRock “… irresponsibly undermines Texas pension fund returns and potentially increases costs for Texas taxpayers. But political theater cannot and should not guide fiduciary actions.

But Lander says that in BlackRock’s response on September 6[i] to the attorneys general, “BlackRock is now abdicating responsibility for driving net zero alignment in its own portfolio by saying it is not asking companies to set specific emissions targets, and that its participation in NZAMI does not mean that BlackRock sets or achieves net zero targets.” It resists criticism that “BlackRock even goes so far as to tout its continued fossil fuel investments – with no specific net targets or commitments or any plans for a gradual transition away from the very investments that increase carbon emissions – as something of a necessity as part of a transition to a green economy.

Lander, after declaring that the three NYC funds “cannot achieve our net zero goals without the active support of all of our asset managers, starting with BlackRock, as our largest manager,” and Formula Three” requests”:

  • Publish an implementation plan that clearly articulates BlackRock’s commitment to achieving net zero emissions across its portfolio, with concrete milestones that detail how it intends to achieve science-based goals within a specific time frame, and mechanisms to regularly report on Scope 1, 2 and 3 emissions for all assets in BlackRock’s portfolio.
  • Provide a step-by-step approach to keeping fossil fuel reserves in the ground and phasing out high-emitting assets.
  • Support climate action through a transparent corporate pledge that demands disclosure of climate-related lobbying, works to end loans and insurance for new fossil fuel supply projects, and pushes for scientific objectives in portfolio companies.

He concludes by citing the damage NYC has suffered from Hurricanes Ida and “Super Hurricane Sandy,” then notes “For New York City, it’s not just our retirement portfolios that are at risk, but the good social and financial -being of our city itself. There’s no time to lose. That’s why we made these net zero commitments. That’s why we take them seriously. That is why we will carefully reassess our business relationships with all of our asset managers, including BlackRock, through the lens of our climate responsibilities.

[i] “We are not, as your letter suggests, dictating to companies what specific emissions targets they must meet or what kind of political lobbying they must pursue,” Blass said. “That’s the role of the company’s management team and the board – it’s not the responsibility of minority investors such as BlackRock.”

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