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Republicans Are Blasting BlackRock's ESG Agenda — Scandal Explained

Kathryn Underwood - Author
By

Oct. 19 2022, Published 11:39 a.m. ET

Recently, BlackRock Inc., the largest asset manager in the world, has faced criticism by Republican legislators for pushing ESG investing over other energy investments.

Environmental, Social, and Governance (ESG) investing has grown more popular in recent years as these types of issues have been brought to the public’s attention.

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However, the firm has refused to quit fossil fuel investments, which puts it in a difficult position.

The SEC’s proposed ESG regulations could help protect investors, but an ESG scandal has emerged as regulators and activists claim funds like BlackRock are misleading investors and shareholders over ESG credentials.

So, what does this all mean? Keep reading for everything you need to know.

First, what is ESG investing?

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Donald Trump with former Wal-Mart CEO Doug McMillon (L) and BlackRock CEO Larry Fink in 2017.

ESG investing refers to three categories: environmental, social, and governance.

Many investors today are focusing on investments that align with their values. This may also be called “socially responsible investing,” “sustainable investing,” or “impact investing,” though these each have different emphases.

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  • Environmental: Investors focus on companies that care for the environment. They may qualify through their funding of green energy projects, natural resource conservation, treatment of animals, and management of waste and pollution.
  • Social: Issues such as diversity, inclusion, and social justice are given high priority by these companies.
  • Governance: This aspect of ESG investing refers to how a company handles its leadership. Transparency in accounting, choice of board members, and avoiding illegal conduct are important.

Despite ESG agenda, BlackRock refused to stop investing in fossil fuels.

In a move that angers climate activists, BlackRock, whose current CEO is Larry Fink, told a British committee that it won't stop investing in fuels like coal, oil, and gas.

“BlackRock's role in the transition is as a fiduciary to our clients — it is not to engineer a specific decarbonization outcome in the real economy,” the company said.

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The Glasgow Financial Alliance for Net Zero (GFANZ) is pushing the world toward net-zero greenhouse gas emissions. BlackRock stated clearly that it's a “fiduciary to our clients,” meaning investment returns for clients takes precedence over climate goals.

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Republicans and state attorneys general have also criticized BlackRock for its ESG agenda.

As Bloomberg reported, on Aug. 4 a letter was sent from 19 state attorneys general. It alleged that BlackRock was pursuing a “climate agenda” that conflicted with the goal of generating returns for state pension funds.

Republicans such as former Vice President Mike Pence have campaigned against investments that target ESG risks. Pence said that large investment firms including BlackRock are pushing a “radical ESG agenda.”

Texas officials also deemed BlackRock as hostile to the oil and gas industry.

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What companies does BlackRock own?

BlackRock holds massive investments in well-known corporations on behalf of its clients. Earlier in 2022, a video claimed that BlackRock and Vanguard own “all of the biggest corporations in the world.”

A BlackRock spokesperson responded to Reuters, “The owners of these securities are our clients, through their investments made on their behalf via the funds managed by Blackrock.”

BlackRock has stakes in companies including Apple, Microsoft, Amazon, and Meta as of the first quarter of 2022.

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