BlackRock, one of the world’s largest investors in banks and fossil fuel companies, has been hired by the EU to work on potential new environmental rules for banks.
Campaigners raised concerns about potential conflicts of interest, given BlackRock’s widespread financial interests in sectors that could be directly impacted by new environmental rules.
The European commission, the EU’s executive arm, said this week that BlackRock had beaten eight other bidders on a contract to study how the EU could best integrate environmental, social and governance (ESG) factors into its banking supervision.
BlackRock is the world’s largest investment manager, with $7.43tn (£5.97tn) in assets under management on 31 December, before the coronavirus pandemic caused a global market rout. The majority of those assets are in products that track equity and bond indices, meaning the company by default controls large stakes in many of the world’s biggest companies.
Analysis by InfluenceMap for the Guardian found that BlackRock in October controlled shares in fossil fuel companies worth $87.3bn that held 3.27bn barrels of fossil fuel reserves. BlackRock is a top-three investor in all eight of the world’s largest oil companies, and a top-10 investor in the 12 most systemically important banks in the world.
Katrin Ganswindt, a climate and energy campaigner at Urgewald, a non-profit environmental and human rights organisation, said: “Appointing BlackRock as advisor to the European commission on environmental, social and governance factors seems a bit like letting the fox guard the henhouse. On top of being the world’s largest investor in fossil fuels, they are also among the leading global financiers of the weapons industry.
“We are baffled as to why the European commission didn’t think there would be a massive conflict of interest with this choice.”
The commission will pay BlackRock’s Financial Markets Advisory (FMA) arm €550,000 (£483,000) for the study, according to a contract award notice published on the commission’s website – equating to only 2.2% of the $24m pay given to BlackRock chief executive Larry Fink in 2018, or 0.012% of the company’s $4.5bn operating profits in 2019.
However, decisions made by European banking regulators on ESG issues could have significant financial effects on the companies whose shares BlackRock holds. For instance, looser restrictions on bank lending to companies fuelling the climate crisis could profit both oil companies and lenders.
BlackRock itself has been strongly criticised for blocking progress on environmental issues. Guardian analysis of data from ProxyInsight found that BlackRock opposed or abstained on 82% of climate-related shareholder resolutions at the companies whose shares it managed between 2015 and 2019, far lower than many rivals.
However, in 2020 the company has taken significant steps to make environmental sustainability a core part of its business. In January it said it would divest from companies that made 25% or more of their revenues from coal, as well as pledging to start using its voting power to force companies to disclose climate risks.
A European commission spokesman said contract was awarded “in full and strict compliance with the applicable EU procurement rules, including those on the eligibility of tenderers and the prevention of any potential conflict of interest”.
BlackRock’s tender was better than competitors, and it will form only one input in the EU’s policymaking, the spokesman added.
A spokesman for BlackRock said its FMA arm functioned separately to the investment management unit.
He said: “We are honoured that BlackRock Financial Markets Advisory has been selected to perform an analysis to inform the European commission’s action plan on sustainable finance, deploying our expertise and capabilities in advising public-sector clients on structural trends, including the transition to a low-carbon future.”