Dive Brief:
- Environmental law nonprofit ClientEarth filed a greenwashing complaint against BlackRock to French financial regulators last week, accusing the investment firm of inconsistently labeling its funds as “sustainable,” despite substantial fossil fuel holdings.
- The complaint, filed to France’s Autorité des Marchés Financiers Oct. 17, targets 18 of BlackRock’s funds listed on French markets with “sustainable” in the fund name. The funds collectively hold $1.04 billion in investments in fossil fuel companies that are developing new fossil fuel projects or are not phasing out production in line with the Paris Agreement goals, according to the complaint.
- ClientEarth alleged in its complaint that BlackRock calling such funds “sustainable” — as such products listed on European Union markets are subject to the bloc’s stricter greenwashing regulations — is “inaccurate and misleading.”
Dive Insight:
ClientEarth alleged BlackRock is in violation of EU and French regulations regarding disclosures for sustainably-labeled funds — including the EU’s Sustainable Finance Disclosure Regulation. The nonprofit said each of the funds have between 1%-27% of their assets under management in inconsistent fossil fuel holdings, with 0.8%-18% of funds’ assets under management exposed to companies expanding fossil fuel production.
Megan Clay, a ClientEarth lawyer, said in an Oct. 17 release that because of the funds’ holdings “investors are unwittingly being exposed to investments worth billions in fossil fuel companies.”
“Exaggerated sustainability claims create a competitive advantage for these BlackRock funds, distorting competition in the market and diverting capital flows away from genuinely sustainable products,” Clay said.
The complaint alleges that the inconsistent holdings in the funds can’t be explained by a strategy of engaging with the companies to get them to align their business practices with Paris Agreement goals, “because the disclosures for each of the Target Funds state that engagement is not used as a means of achieving the fund’s sustainable investment objectives.”
In response to the complaint, a BlackRock spokesperson told ESG Dive that the firm’s “sustainable funds are managed in line with applicable regulations governing sustainable investing.”
“BlackRock's funds are managed in accordance with their investment objectives, that are clearly disclosed in each fund's prospectus and on BlackRock’s website,” the spokesperson said in emailed comments Thursday.
ClientEarth said it will also be alerting the European Securities and Markets Authority — the EU’s securities markets regulator — about the action, but it will be on France’s AMF to pick up additional action on the complaint.
The nonprofit is looking for three main outcomes, according to the press release. ClientEarth hopes the complaint will force the AMF to conduct enforcement “to ensure investment firm funds labeled ‘sustainable’ are actually so;” for BlackRock to change the fund names or reallocate the funds’ portfolios to be consistent with their names; and for other investment managers and regulators to take notice of the complaint.
BlackRock is the largest U.S. asset manager, with nearly $11.5 trillion in assets under management as of Q3 of this year. The investment firm has become a consistent target of the anti-ESG movement amid aligned legislators in the U.S., and finds itself on restricted lists in several states for being perceived as “boycotting” fossil fuels.
The complaint represents the first action ClientEarth has taken against an investment firm, and BlackRock said in its annual SEC filing for 2023 that increased scrutiny and regulations on ESG and related disclosures could affect the company’s revenues and reputation.
Clarification: This story was updated to clarify ClientEarth filed a legal complaint to French authorities.
