Dive Brief:
- A coalition of 16 Republican attorneys general penned a letter to BlackRock fund directors last week, questioning statements made by the asset manager over its ESG policies, decisions made by mutual fund managers and the firm’s “participation in programs that push the political goals of environmental activist groups.”
- The Feb. 27 letter was spearheaded by Montana Attorney General Austin Knudsen and followed BlackRock’s decision to scale back its membership from Climate Action 100+ — a $68 trillion climate action investor group — after members JPMorgan Asset Management and State Street Global Advisors announced their departure. Knudsen, however, noted that the firm remains a member of other ESG groups, which he alleges causes conflicts of interest in its “duty to act exclusively for the financial benefit of its shareholders.”
- Knudsen’s office said the attorneys general first sent a letter to BlackRock last year but received an “inadequate response” that didn’t address several of the concerns raised. The most recent letter builds on the seven questions initially sent to the firm’s fund directors in July and asks for a response by March 26.
Dive Insight:
The group of attorneys general applauded BlackRock’s revaluation of its status in Climate Action 100+, which saw the firm transfer its membership to a smaller subsidiary, BlackRock International, last month. However, they raised concerns about its continued involvement with groups such as the Net Zero Asset Managers initiative, the United Nations Principles for Responsible Investment, and Ceres.
“I have serious concerns about BlackRock’s Environmental, Social, and Governance investments, their conflicting statements regarding ESG, and the potential conflicts of interest with independent fund directors,” Knudsen said in a release. The state attorney general noted that fund directors have a fiduciary duty to make clients as much money as possible and alleged “BlackRock appears to be more concerned about pushing the woke, liberal agenda.”
The New York-based firm, which is the nation’s largest asset manager, has repeatedly come under fire over its stances on ESG. BlackRock has landed itself on restricted and boycott lists in four states, in addition to having had Republican governments divest from it over its fossil fuel stances.
Last month, the firm said such actions “adversely impact BlackRock’s business” and listed ESG under potential legal, regulatory and reputational risks in its annual 10-K filing with the Securities and Exchange Commission.
The letter asks BlackRock’s fund directors to expand on responses submitted on behalf of some of the directors on Aug.7, and requests that all recipients of the letter “respond to all of the questions to the extent that … relate to [their] role as a director of a BlackRock-managed fund.”
Knudsen asked the firm’s directors about specific processes they undertook to determine whether BlackRock should remain a fund adviser. The attorneys general also inquired whether firm directors conducted any specific oversight or investigation to resolve an “apparent contradiction between BlackRock’s commitment on the one hand to use all funds under management to achieve certain environmental goals, and its representation in prospectuses and other communications that specific funds did not seek to follow a sustainable investing strategy on the other.”
The letter also asked fund directors if they believe BlackRock’s material for some funds — which state that “sustainability characteristics do not correlate to current or future investment performance,” according to the letter. And — if they do believe this statement — what is the basis for allowing BlackRock to publish statements for other funds claiming that climate-related factors are relevant to the long-term prospects of investments.
“What steps have the independent directors taken to verify that BlackRock exercises proxy powers consistent with the best interests of the funds, rather than the best interest of BlackRock, or consistent with BlackRock’s commitment to manage all assets under management to further environmental goals?” Knudsen asked.
The letter was also signed by attorneys general from Alabama, Arkansas, Georgia, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, South Carolina, South Dakota, Texas, Utah, Virginia, and West Virginia.
