BlackRock’s Stealth Anti-Climate Agenda
Climate activist Chelsea McMillan is arrested outside BlackRock’s New York City headquarters on Oct. 18, 2021. (AP Photo/Jessie Wardarski)
A massive investment company publicly touts its green credentials while quietly pressing to weaken a landmark climate disclosure rule.
BlackRock, the world’s largest investment company, has become a top target of the right’s crusade against so-called “woke capitalism” because of its rhetoric around climate change and sustainable investing. But when it comes to climate action, the giant asset manager isn’t presently all that far apart from its GOP detractors. Both BlackRock and congressional Republicans are fighting — albeit through different strategies — to defang a forthcoming regulation that would force companies to disclose their carbon emissions and the risks that climate change pose to their business models.
BlackRock CEO Larry Fink has warned that climate risk constitutes an investment risk. But after the Securities and Exchange Commission (SEC) proposed mandatory disclosure of those risks this spring, the $10 trillion asset manager is lobbying to weaken the final rule, according to a Lever review of BlackRock’s rulemaking comments, federal lobbying disclosures, and meeting memoranda from the SEC. So far this year, the investment firm reported spending nearly $2 million lobbying on finance issues that include climate risk and environmental, social, and governance (ESG) disclosure.
The Wall Street Journal has described BlackRock as “walking a political tightrope” between activists on both sides of the sustainable investing debate. But the investment firm’s apparent attempt to undercut the type of measures it’s championed publicly for years instead suggests that it may have hit upon a more effective strategy for navigating the climate transition than the GOP’s outright denial. By aggressively growing the market for ESG funds — which typically net them higher management fees — while pushing watered down regulations and maintaining its status as one of world’s largest fossil-fuel investors, BlackRock can ensure that the climate crisis is a win-win-win.
SEC rulemaking, through which the agency interprets and adapts U.S. securities law according to the changes in the market, seldom garners broad public interest. However, the proposed climate disclosure rule has drawn a record-setting 14,000 comments, ranging widely in tone and content, from lobbying groups, institutional investors, elected officials, academics, and climate advocates.
Pushback on the rule stems from a predictable array of business groups such as the U.S. Chamber of Commerce, as well as Republicans in federal and state offices attacking the growing use of ESG criteria in investing. BlackRock, which has made ESG funds and disclosures mainstream, has become a central target of those attacks. On Thursday, Texas lawmakers grilled BlackRock executives about whether ESG policies are jeopardizing pension returns. A dark money group tied to conservative activist Leonard Leo has run TV ads accusing the firm of “harassing oil and gas companies, making them divest from fossil fuels.”
But in reality, BlackRock is largely aligned with its GOP critics on one of the biggest points of contention in the proposed SEC rule: the disclosure of so-called “Scope 3” carbon emissions that occur across a company’s value chain, including the impact of consumers burning fossil fuels that a company sells or helps finance.
Experts say that robust reporting of Scope 3 emissions is critical to giving the rule teeth; by contrast, a company’s direct emissions (Scope 1) and those associated with its purchase and use of energy (Scope 2) usually account for just a fraction of its overall footprint. While the GOP attacks the SEC’s statutory authority to require Scope 3 disclosures, BlackRock is pushing changes that critics say could render those requirements almost meaningless.
“We do not believe the purpose of Scope 3 disclosure requirements should be to push publicly traded companies into the role of enforcing emission reduction targets outside of their control,” the firm wrote in comments submitted to the agency.
BlackRock declined to answer specific questions from the Lever. But the firm has said there’s no contradiction between its past public statements and present private actions.
Environmental groups disagree. “BlackRock has publicly called for stronger regulation and government intervention over and over again,” wrote a coalition of 10 organizations including the Sierra Club and the Sunrise Movement in a statement responding to the firm’s rulemaking comments. “Disclosure is just the first step in an urgent and necessary regulatory framework to address climate risk. How can we expect BlackRock to support the more ambitious regulations and market interventions needed to actually reach a net zero economy?”
A Green Veneer On Business As Usual
Three years ago, BlackRock CEO Larry Fink proclaimed that “climate risk is investment risk” in his influential annual open letter to companies the firm invests in. Companies that fail to plan for the massive upheavals and new investment opportunities resulting from climate change will be left behind, Fink reasoned.