BlackRock as a regulator for banks

The EU would like to supplement its banking supervision with a set of rules that also includes the factors of Environment, Social Affairs and Governance, which in German can best be translated as responsibility. That sounds laudable. However, if the Financial Group BlackRock of all people is commissioned with a study that is supposed to work out the basics for the implementation of these factors in banking supervision, the laudable idea becomes a Farce. Because BlackRock is a dazzling example of how not to do it in the fields of Environment, Social Affairs and Governance.

Further information on BlackRock and Co. can be found in my new book “wer schützt die Welt vor den Finanzkonzernen”, which was published by Westend Verlag and can be ordered from bookshops or online. The book analyses the background and developments that have led to the incredible concentration of wealth and power of the financial giants, identifies the dangers and outlines the possibilities for a political rethink.

BlackRock and the environment

Together with its competitors Vanguard and State Street Corp., BlackRock has invested more than $ 300 billion in companies that are among the largest carbon emitters in the world. Since the Paris climate agreement was signed, these companies ' emissions have risen from 10,593 gigatons of CO2 to 14,282 gigatons of CO2 – equivalent to around 38 percent of global CO2 emissions in 2018. Australian Mining Group BHP Group (formerly BHP Billington) alone accounts for 0.52 percent of global CO2 emissions.

On 17 October 2019, a group of shareholders tabled a Resolution to ban BHP from joining lobby groups that work against the goals of the Paris agreement on climate change. At BHP’s Annual General Meeting, 22 percent of shareholders voted in favour of this Resolution, seven percent abstained. The Rest voted against it. Including BlackRock.

BlackRock also opposed the implementation of environmental policy measures at the oil company Royal Dutch Shell (RDS). At a remarkable annual general meeting in December 2018, a shareholder group called Climate Change 100+ forced the British-Dutch oil multinational to make several concessions on climate policy. Shell committed itself to defining targets for its carbon dioxide emissions, discloses its lobbying and association activities in the field of climate protection and-again, this is remarkable - will orient executive board salaries towards emission savings in the future. The success is explained When you look at who Climate Action 100 + is.

What sounds like a small Association of critical shareholders is an alliance of financial groups that together manage US $ 35 trillion-including Allianz, Axa, pension fund CalPERS, German DWS, Italian Generali, Dutch Rabobank and Swiss UBS. Those who are missing are the three big ones – BlackRock, Vanguard and State Street. The financial service Portfolio Adviser commented on the resistance with the phrase: “BlackRock and Vanguard are betraying their rivals in the fight against climate change”. And this is by no means an isolated case.

In October 2019, the Harvard Business School (HBS) published a study on the voting behavior of BlackRock and Vanguard in votes related to corporate policy on climate change. The result is frightening. BlackRock and Vanguard are not only among the financial groups that have voted least in terms of climate protection, but in at least sixteen cases have even actively prevented the adoption of corresponding resolutions at the general meetings.

Whether the shooting aid for climate offenders comes from the fact that of the 18 BlackRock board members, six were previously employed by an oil or gas company? Be that as it may. BlackRock has a ravenous record on environmental and climate policy and is therefore quite unsuitable to draw up a set of rules to force the financial sector to include the “environment” factor in its entrepreneurial concept.

Social and Governance

BlackRock’s record on social and Governance issues is similarly disastrous. For example, BlackRock is one of the largest shareholders in the Swiss commodities giant Glencore plc, which is responsible for the exploitation of the African continent like no other group in the world. But even in the industrialised countries of the global north, BlackRock does not make a name for itself as a representative of democratic, social or responsible corporate policy.

BlackRock supports global multinationals such as Amazon, Disney, Google, McDonalds, Apple, Facebook and Starbucks in avoiding their tax obligations worldwide. As the largest shareholder and thus the most important co-owner of these corporations, BlackRock could stop this antisocial activity from one day to the next … but BlackRock doesn’t even think about that.

BlackRock is a chilling example for all those who have ever dealt with the term “Governance”. The group is significantly involved in more than 15,000 large companies. At BlackRock, these 15,000 companies are managed by a Stewardship department with a total of 45 employees. However, these employees only had contact with 1,458 companies from the large BlackRock empire in the 2018 financial year.

Nine out of ten companies in which BlackRock has a significant stake are therefore not controlled at all, and in the “controlled” tenth, one BlackRock employee comes to 32 companies; and these are not small medium-sized companies, but, without exception, global multinationals whose holdings often include entire file folders. Nevertheless, BlackRock participated in 16,124 general meetings in fiscal year 2018 and cast its vote in 155,131 individual voting points – and by the way, in 92% of all cases followed the recommendation of the respective company executive board.

So a financial group that does not fulfil its obligations as co-owner of thousands of companies should now design a set of rules for Governance? A giant for whom social factors are simply non-existent in the management of its holdings should recommend rules for a social corporate policy to other corporations?

What drove the EU Commission to this strange tender is and remains a mystery, unless one assumes that the planned ESG rules are a mere alibi measure and one can be sure that these rules will not contain any points that hurt the banks. And that’s probably how it will be. Whoever commissions the Wolf with a protection concept for the sheep herd is certainly not interested in the physical well-being of the sheep.

And someone is surprised that the EU has such a bad reputation among its citizens.