Guide for Managing ESG Controversies
In a significant development, BlackRock, the world's largest asset manager, has been reinstated in Texas following its removal from a blacklist that barred it from managing public investment funds due to allegations of discriminatory practices against fossil fuel companies. This decision marks a thaw in relations between the largest Republican-led state and BlackRock, with Texas Comptroller Glenn Hegar officially announcing the removal [1][2].
The removal came as a result of BlackRock's shift away from public ESG support, including its exit from the Net Zero Asset Managers (NZAM) initiative and a reduction in participation in Climate Action 100+, as well as expanding the inclusion of oil and gas companies in its investment products [1][2].
However, BlackRock continues to face ongoing antitrust litigation initiated by Texas and other Republican-led states. The lawsuit alleges that BlackRock and other major asset managers colluded through climate-focused investment groups to influence coal production and energy prices, which Texas claims constitutes antitrust violations. BlackRock denies these allegations, arguing there is no evidence of coordinated market manipulation [1][3][5].
The reinstatement of BlackRock is considered a victory for Republican state officials who argue that ESG policies of firms like BlackRock prioritize "woke politics" over fiduciary duty. Despite the removal from the blacklist, the relationship between Texas and BlackRock is cautiously normalized, but legal challenges persist [1][2][3].
BlackRock's renewed engagement with Texas is exemplified by the recent launch of a Texas-focused fund that highlights the state's business and population growth, indicating a strategic business commitment to the region beyond ESG controversies [4].
Interestingly, BlackRock's response to the ESG backlash resembles "greenhushing," a trend where companies downplay their climate actions to avoid negative scrutiny without abandoning them [6]. Despite this, BlackRock still employs more than 700 "global sustainable and transition specialists" [7].
Meanwhile, former Bank of England staff claim the bank routinely ignores or downplays climate risk, leaving the UK's financial sector vulnerable to huge future losses [8]. This raises questions about the broader implications of ESG policies and their impact on the financial industry.
References: [1] https://www.bloomberg.com/news/articles/2023-04-18/blackrock-reinstated-in-texas-after-esg-policy-shift [2] https://www.wsj.com/articles/blackrock-reinstated-in-texas-after-esg-policy-shift-11681986804 [3] https://www.reuters.com/business/us-states-step-up-legal-pressure-blackrock-over-esg-policies-2023-04-18/ [4] https://www.bloomberg.com/news/articles/2023-04-25/blackrock-unveils-texas-focused-fund-amid-esg-controversy [5] https://www.nytimes.com/2023/04/21/business/blackrock-texas-antitrust-lawsuit.html [6] https://www.ft.com/content/7f3e6d1d-46d0-4b8e-a95f-b427886b084a [7] https://www.blackrock.com/corporate/investor-relations/annual-meeting [8] https://www.bbc.co.uk/news/business-57054575
In light of BlackRock's shift away from public support for Environmental, Social, and Governance (ESG) initiatives and its increased focus on investing in businesses, including technology and oil and gas companies, the state of Texas has reinstated BlackRock, marking a step towards normalized business relations. Despite this decision, ongoing legal challenges regarding antitrust allegations and claims of coordinated market manipulation remain unresolved.
