BlackRock’s climate change credentials ‘full of greenwash’ | Business News

Greenwash. It’s a term bandied about quite liberally and, often, quite unfairly.

It is an accusation particularly harnessed by those who publicly parade their credentials in combating climate change.

One of those who has spoken out on the subject at length is Larry Fink, chief executive of BlackRock, the world’s biggest asset management firm.

In his annual letter to shareholders, published in January this year, Mr Fink said the company would place more pressure on companies in environmental issues.

And last month, at the so-called ‘Davos in the Desert’ event in Saudi Arabia, he urged businesses everywhere to think harder about the subject.

He told attendees: “I do believe that as capitalists, if we don’t focus on climate change, we are going to be stranded.”

So it would have been interesting to have been in the offices of BlackRock’s head office, on New York’s Park Avenue, when news filtered through of an attack on the company by Sir Christopher Hohn, the hedge fund manager, accusing it of greenwashing.

In comments first reported by the Financial Times, Sir Christopher said “major asset managers like BlackRock have been shown to be full of greenwash”, adding that BlackRock’s record on voting for climate-related shareholder resolutions was “appalling”.

He said the owners of assets, such as pension funds, ought to fire fund managers that did not insist on transparency on climate issues.

Sir Christopher, whose firm TCI manages assets worth $28bn, is known for his passionate support for environmental causes.

He was recently revealed to be the biggest single donor to Extinction Rebellion, the climate change activist group, to which he has given at least £50,000.

The charity he founded, the Children’s Investment Fund Foundation, contributed a further £150,000 to Extinction Rebellion.

The FT reported Sir Christopher he had also written to a number of companies, including Airbus, Moody’s and Charter Communications, demanding that they improve their pollution disclosure and threatening to vote against their directors.

In the letter, he wrote: “TCI believes that climate change-related risks, in particular a company’s greenhouse gas emissions, will have a material effect on a company’s long-term profitability, sustainability and investor returns.”

Sir Christopher told the FT: “Asset owners should fire asset managers that do not require such disclosure.”

He said BlackRock was guilty of “greenwash” because it does not require emissions disclosures.

His remarks will be hugely irritating to BlackRock, which manages almost $7tn worth of assets worldwide, as it runs a number of funds that seek to back innovators “who provide solutions to climate change”.

These include businesses in the renewable energy and electric vehicles sectors and those seeking to come up with more effective ways of recycling.

The big question is whether the criticism is justified.

Sir Christopher’s attack on BlackRock in particular is supported by the work of InfluenceMap, a British-based non-profits research group, which has published a number of reports critical of BlackRock.

In May this year, for example, InfluenceMap reported that BlackRock was the largest global investor in coal and said that, based on its shareholdings in major mining companies, it effectively owned 2.1 billion tonnes of thermal coal reserves.

InfluenceMap also reported that, since the 2015 Paris agreement on climate change, the world’s 15 largest asset management groups, including BlackRock, had raised their coal holdings by a fifth.

Last month it also published research suggesting that an exchange traded fund (a type of collective investment) sold by BlackRock, badged a ‘Low Carbon Target’ ETF, held shares in Chevron and Royal Dutch Shell.

And just last week, with the finding that seems to have particularly exercised Sir Christopher, InfluenceMap accused BlackRock of having one of the worse records in the industry for voting on climate resolutions.

It said that, in 2018, BlackRock had voted against 90% of shareholder-led climate change resolutions.

This, it argued, made BlackRock among the least supportive of such resolutions.

Responding to last week’s report, BlackRock told Financial News: “BlackRock has the largest stewardship team in the world, and engaged 370 companies globally on the topic of climate risk in the past two years, more than five times the number of climate-related shareholder proposals that came to a vote over the same period.

“We put a priority on engaging with a company on addressing climate-related issues even in the absence of shareholder proposals.”

BlackRock’s problem is that its sheer size, the sheer volume of assets that it has under management, means that it will inevitably – like its rivals Vanguard and State Street, also criticised by InfluenceMap – have shareholdings in companies that some people find contentious, such as oil and gas producers and mining corporations.

Yet the research by InfluenceMap does raise the question of whether BlackRock’s stewardship team, despite its size, is large enough to engage with as many companies as it ought to.

This is something Sir Christopher clearly believes.

However, in lobbing boulders at BlackRock, Sir Christopher has also exposed himself to the charge of hypocrisy.

TCI is understood to be a shareholder in a number of large US transport companies, including Union Pacific, Canadian Pacific Railway and Union Pacific Corp, which all presumably are major carbon dioxide emitters.

It was also recently revealed to be a significant investor in Ferrovial, the Spanish infrastructure company which is the biggest single shareholder in Heathrow Airport, as well as being one of the biggest shareholders in Luton Airport’s Spanish parent.

Sir Christopher, who made his name taking to task under-performing company boards, can argue that these shareholdings place him in a good position to exert pressure on such companies.

He would also doubtless argue that TCI does a better job than BlackRock of holding such businesses to account.

But a cynic would say his high-profile criticism of BlackRock – which made the splash in the FT today – was merely a marketing exercise aimed at attracting a chunk of the growing sums institutions are investing on Environmental, Social and Governance (ESG) criteria.