Energy & Environment

Activist investors blast BlackRock’s ‘hypocrisy’ on sustainability, call for CEO ouster

FILE – Coal miner Scott Tiller takes shelter from the rain after coming out of an underground mine at the end of a shift in Welch, W.Va., May 12, 2016. (AP Photo/David Goldman, File)

An activist investment firm is calling on BlackRock’s chief executive to resign over his “apparent hypocrisy” in the use of sustainability goals.

The chief investment officers of United Kingdom-based Bluebell Capital Partners accused CEO Larry Fink on Tuesday of repeatedly failing to live up to his stated sustainability commitments.

BlackRock’s combination of increased rhetoric around sustainability with continued funding of fossil fuels like coal created a worst-of-all-worlds situation for sustainable investing, Bluebell chief investment officers Giuseppe Bivona and Marco Taricco wrote.

In its letter published on Tuesday, Bluebell is concerned about “the gap between what BlackRock consistently says on ESG and what they actually do,” Bivona told CNBC, referring to environment, social and governance-focused (ESG) investing.

“We see BlackRock endorsing a number of bad practices from a governance, social and environmental perspective which is not actually in tune with what they say,” Bivona added.

The letter comes amid a widespread reaction from U.S. Republicans against ESG investing in general and BlackRock in particular.

Florida just followed Texas, Missouri and Louisiana in pulling billions of dollars in state assets from management by BlackRock.

In a January letter to investors, Fink defended the company against accusations by conservatives that BlackRock was using its economic power for political ends — arguing that sustainability was good business. 

But Fink also defended BlackRock’s continued investment in climate-harming fossil fuel companies. In the January letter, he wrote at length about the importance of remaining invested in problematic companies as a means of maintaining influence over their activities — which would be lost under divestment.

“Divesting from entire sectors — or simply passing carbon-intensive assets from public markets to private markets — will not get the world to net zero,” Fink wrote.

As conservative attacks on ESG heated up, BlackRock released a fact sheet boasting its investment of $170 billion in U.S. public energy companies, ”including pipelines and power generation facilities.”

This sort of careful tightrope-walking has meant “reputational risk (including greenwashing risk) to which BlackRock under the leadership of Larry Fink have unreasonably exposed the company,” Bivona and Taricco wrote the company in a now-public November letter.  

“The contradictions and apparent hypocrisy of BlackRock’s actions have  . . .  politicized the ESG debate,” Bivona and Taricco wrote. 

“The reputational damage of being dragged into this politically charged debate, in our view, is very significant because it calls into question the independence of BlackRock as an asset manager.”

While BlackRock is the largest member of the Net Zero Asset Manager Initiative, it is still a major investor in coal, oil and gas, according to an April report from Reclaim Finance.

BlackRock holds $133 billion in oil and gas investments, Reclaim reported.

And along with large asset manager Vanguard, BlackRock also holds $60 billion in coal, per Reclaim.

In particular, BlackRock’s continued investment in Glencore — the world’s 11th largest coal producer — shows why “BlackRock most embodies the hypocrisy of too many asset managers,” Lara Cuvelier of Reclaim Finance said in a statement at the time.

BlackRock’s framing of the fossil fuel debate as “divestment versus engagement,” was overly simplistic, according to Reclaim.

“Pitting engagement and exclusion as diametrically opposing practices is at best misguided and at worst a deliberate strategy to avoid exclusion,” the report wrote. 

“In fact, the most effective investors use exclusion and divestment and the threat of future divestment as a cudgel to enhance their engagement efforts,” Reclaim added.

Members of “engagement-first” groups like the Net Zero Asset Manager Initiative voted against almost a third of environmental resolutions at the companies they invested in, according to a 2021 study by activist group ShareAction.

One particular example helped lead for Bluebell’s current call for Fink’s ouster.

In April, BlackRock’s refusal to back sustainability proposals that Bluebell — which has a 0.01 percent stake in the asset manager — called for at companies like the mining giant Glencore, according to the Financial Times.

Specifically, BlackRock refused to support Bluebell’s February shareholder resolution that sought to force Glencore to spin off its thermal coal business, which produces coal for power plants.

“Due to its coal business, Glencore is not an investible company for investors who place sustainability at the heart of their investment process,” Taricco and Bivona wrote in 2021, according to Bloomberg

“A clear separation between carbonized and de-carbonized assets is needed to increase shareholder value and remove the ‘coal discount’, whilst simultaneously ensuring that coal assets will be managed responsibly.” 

While Fink has often warned of the dangers of divestment, this was not a principled stance, Bivona told CNBC.

“Let me say that when the price of coal was around $76 per ton, BlackRock was talking about essentially divesting,” he said.

“Now that the price of coal is $380 per ton, they are talking about responsible ownership. I think there is a high correlation between BlackRock’s strategy on coal and the price of coal,” Bivona added.

BlackRock pushed back — albeit in a manner that essentially agreed with Bluebell’s description of their vote as primarily financial. 

“In the past 18 months, Bluebell has waged a number of campaigns to promote their climate and governance agenda. BlackRock Investment Stewardship did not support their campaigns as we did not consider them to be in the best economic interests of our clients,” BlackRock representatives wrote in a statement.

But Bluebell has managed to make big waves at other companies where it had only a relatively small investment, the Financial Times reported.

The activist investors successfully deposed the chief executive at Danone last year, according to Financial Times.

Tags Blackrock Coal esg Investing Larry Fink Sustainability
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