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Keeping you in-the-know on environmental, social and governance developments

As you probably heard, last week BlackRock submitted its response to the August 4 letter signed by the Attorneys General of 19 states accusing the financial firm of “boycotting energy companies.” Here are a few excerpts I think directly deflect the AGs’ attacks:

… we are disturbed by the emerging trend of political initiatives that sacrifice pension plans’ access to high-quality investments – and thereby jeopardize pensioners’ financial returns… 

Governments representing over 90% of global GDP have committed to move to net-zero in the coming decades. We believe investors and companies that take a forward-looking position with respect to climate risk and its implications for the energy transition will generate better long-term financial outcomes…

Contrary to the claim in your letter, we do not ‘assume that the Paris Agreement will be implemented within the United States, and by all of its signatories, on time and in full by 2050.’ Rather, as we have previously stated, the speed and shape of this transition are unclear. What is clear, on the other hand, is that there are investment risks and opportunities associated with a transition to a low-carbon economy… 

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. 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. Indeed, we have voted against shareholder proposals that, in our assessment, are intended to micromanage companies. This includes proposals that are unduly prescriptive and constraining on the decision-making of the board or management or address matters that are not material to how a company delivers long-term shareholder value…

Your letter implies BlackRock has full discretion over where and how public pension fund investments and votes are directed. That is not the case. As a fiduciary, we are bound to adhere to our clients’ investment guidelines and objectives, including those specified by the pension funds in your states… all U.S. public pension funds, including the pension funds in your respective states, are now able, in many of our investment products, to determine for themselves how to vote proxies…

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. 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. These projects involve a diverse mix of energy sources, including natural gas and renewable sources of energy, as well as decarbonization technology that needs capital to scale. Such a significant investment in, and cooperation with, energy industry companies, ranging from international corporations to entities dedicated to serving local communities in your states, is completely at odds with any notion of a boycott.

The continuing politicization of ESG investing initiatives will likely be quite the saga as the situation continues to evolve. Stay tuned. Also, the 1st Annual Practical ESG Conference and the 2022 Proxy Disclosure and 19th Annual Executive Compensation Conferences both have panels exploring different aspects of institutional investor views and comments on ESG in investment strategies and proxy voting. You won’t want to miss those, so register today!

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile