Wall Street’s Sustainable Darling Is Profiting from Climate Change
Credit to Author: Geoff Dembicki| Date: Fri, 24 May 2019 15:28:49 +0000
Larry Fink is one of the most powerful business people on the planet, and he wants to be known as a steward of the environment. As chairman and CEO of BlackRock, the New York-based investment company that manages $6.52 trillion in assets, Fink oversees wealth more than two times the size of the UK economy. He’s made a name for himself not as a cutthroat titan of industry, but a relative progressive. He’s on the board of the Nature Conservancy, a large and influential environmental group, and earlier this year, Fink wrote a letter to urge his fellow CEOs to adopt a “sustainable” and “long-term approach” to doing business.
His company has talked the same sort of talk: Earlier this year BlackRock released a major report on climate change that was praised by some environmentalists. The report warned that “investors who are not thinking about climate-related risks, or who view them as issues far off in the future, may need to recalibrate their expectations.” A spokesperson for BlackRock told VICE that “we have a big commitment to sustainable investing.”
“Larry Fink really has marketed himself as a good guy,” said Diana Best, a finance campaigner with the Sunrise Project, an organization that helps fund and support other NGOs. “He’s long been revered and held on a pedestal as almost a darling of Wall Street—a guy that’s getting it right.”
But Best and others are troubled by what they see as blatant hypocrisy. Despite Fink’s exhortations that CEOs “address pressing social and economic issues” in addition to making profits, BlackRock invests in some of the most environmentally damaging companies on the planet.
On Thursday, a coalition of activists known as BlackRock’s Big Problem held a banner reading, “BlackRock: Taking your money—investing in climate chaos,” outside the Lotte New York Palace Hotel, where the company held its annual shareholder meeting. The group, which is pushing for BlackRock to divest from planet-destabilizing industries, recently released research showing that funds the company markets to investors in the US as “sustainable” are contributing to climate change.
Ten of these funds collectively include more than $423 million in fossil fuel companies, as well as $29 million in companies linked to deforestation. In fact, BlackRock is the world’s single biggest investor in companies that develop coal plants and also a large investor in companies that produce oil and gas. Without an immediate and rapid reduction in our use of fossil fuels, it will be impossible to achieve the greenhouse gas emissions cuts that the United Nations calculates are necessary by 2030 to preserve the planet as we know it.
“BlackRock is perhaps the biggest name you’ve never heard of that is driving the climate crisis,” said Gaurav Madan, a campaigner with BlackRock’s Big Problem. “We can’t continue to burn fossil fuels and wipe out forests that release carbon pollution into the atmosphere, and yet this is exactly what BlackRock is enabling through their investments.” (Madan has contributed to VICE.)
BlackRock doesn’t deny the research showing that carbon-heavy companies are included in its sustainable funds. A company spokesperson suggested that this makes the funds more viable. “Let’s say you’re a financial advisor managing for someone towards their retirement goals, this allows you to track against the benchmark while achieving some of the climate-aware goals you might have,” the spokesperson said.
It’s common for investment products that claim to be environmentally friendly to actually include fossil fuel companies. Yet BlackRock was able to explicitly exclude oil sands and thermal coal companies from six sustainable funds it markets in Europe. Meanwhile, the “sustainable” funds it offers in the U.S. include companies like ConocoPhillips, which not only derive a huge share of their revenues from fossil fuels, but also actively lobby against legislation that limits the amount of oil and gas we pull from the ground. “BlackRock has a very loose definition of what’s sustainable,” said Best.
Fink’s letter to CEOs argued that economic anxiety is fueling “popular anger, nationalism, and xenophobia,” and that in this environment companies need a purpose greater than “the sole pursuit of profits.” The business outlet Barron’s last year dubbed Fink “the new conscience of Wall Street.”
Nowhere in the Barron’s story, however, does it mention that BlackRock invests in companies that destroy vast tropical forests, which is the second largest cause of climate change after burning fossil fuels. The company owns shares, for example, in Golden Agri-Resources, whose subsidiary wanted to clear-cut over 513,000 acres of forested area in Liberia for a palm oil plantation—but was stopped because of a campaign led by Alfred Brownell. The Liberian activist, who recently won this year’s Goldman environmental prize, at one point received terrifying death threats from private security guards. “They threatened to cut off my head, to eat my heart and drink out of my skull,” he told the Guardian last month.
“It is time that BlackRock stops financing, sheltering and shielding destructive investments that threaten people and the planet,” Brownell wrote this April in a letter addressed personally to Fink.
The disconnect between what Fink says and what his company does on climate change is clear to see in BlackRock’s voting record at shareholder meetings. At those meetings, people and entities that hold stock in a company can put forward proposals for the company that other shareholders vote for or against. “It’s a form of shareholder democracy,” said Rob Berridge, director of shareholder engagement at the Boston-based nonprofit Ceres.
Yet BlackRock, an influential presence at such meetings, rarely votes in favor of proposals asking for a company to disclose the risks it faces from climate change or come up with a plan to mitigate those risks. Ceres calculated that in 2018, BlackRock supported proposals like this only 10 percent of the time.
“It’s deeply puzzling as to why they can’t vote for more climate-related shareholder proposals,” Berridge said, especially with the company’s public commitment to fighting climate change. “We’re just perplexed.”
BlackRock says that it prefers to influence companies in private. From July 1, 2017 to June 30, 2018, BlackRock sent out letters about climate change to the heads of 232 companies it invests in, including more than 100 of the world’s biggest carbon emitters. About 50 companies responded. For now this appears to be the upper limit of what BlackRock is able—or willing—to do on climate change. The company claims that actually withdrawing its investments from fossil fuel producers and other climate destroyers isn’t feasible because it manages index funds that are exposed to the entire stock market. “Regardless of how we felt about it,” the spokesperson said, “it’s not really an option.”
Berridge appreciates these financial constraints. But the flip side of BlackRock owning $6.52 trillion of the global economy is that the company has a massive interest in avoiding the catastrophic climate scenarios that are becoming more likely every day—pressure is growing for companies like BlackRock to take drastic action. “Societal collapse is not good for business,” he said.
Geoff Dembicki is the author of Are We Screwed? How a New Generation Is Fighting to Survive Climate Change. Follow him on Twitter.
This article originally appeared on VICE US.