The Big Apple rejects BlackRock ESG Response

In recent weeks, some government officials have pushed back against imposing ESG factors in government pension investment considerations — now others are pushing back against that pushback, criticizing BlackRock CEO Larry Fink for not taking a stronger pro ESG stance.

In an eight-page, heavily footnoted letter to BlackRock CEO Larry Fink, New York City Comptroller Brad Lander, “the trustee, trustee and delegated investment adviser of the New York City Retirement Systems,” expressed concern that BlackRock was not pushing hard enough for 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 claim that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonisation in the real economy,” he wrote in the letter from 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 go along with that position, to move its portfolio companies , to bring their businesses into line with a net zero economy.”

Lander states that a letter written 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 have taken over their states” and commented 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 should not guide fiduciary action.

But Lander says this in BlackRock’s September 6 response[i] to the attorneys general, “BlackRock has now abdicated responsibility for net zero alignment in its own portfolio, saying it does not require companies to set specific emissions targets and that its participation in NZAMI does not mean BlackRock sets or achieves some net zero goals.” He maintains criticism that “BlackRock even goes so far as touting its continued investments in fossil fuels—without specific net-zero goals or commitments or any plan to phase out the carbon-increasing investments themselves—as somehow a necessary part of the transition to a green economy.”

Lander, after saying the three New York funds “could not achieve our net zero goals without the active support of all of our asset managers, starting with BlackRock, as our largest manager,” and asked three “questions” :

  • Publish an implementation plan that clarifies BlackRock’s commitment to achieving net zero across its entire portfolio, with specific steps that detail how it intends to achieve science-based goals over a specific timeframe, and clear mechanisms for regular reporting on scopes 1, 2 and 3 issues for all assets in the BlackRock portfolio.
  • Provide a comprehensive approach to keeping fossil fuel stocks in the ground and phasing out high-emitting assets.
  • Support climate action through a transparent corporate commitment that requires disclosure of climate-related lobbying, works to end credit and insurance for new fossil fuel supply projects, and insists on science-based targets at portfolio companies.

He concludes by citing the damage New York has suffered as a result of Hurricanes Ida and Superstorm Sandy, and then notes “for New York City, not only are our pension portfolios at risk, but the social and financial well-being—our very existence city. There is no time to delay. That’s why we made these net zero commitments. That’s why we take them seriously. We will therefore carefully reassess our business relationships with all our asset managers, including BlackRock, through the lens of our climate responsibilities.”

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