Saturday

6th Jun 2020

Opinion

Is BlackRock setting agenda for EU climate policies?

  • BlackRock is now being asked to set the agenda for that debate, and will even be paid €280,000 to influence the reform agenda for the financial sector (Photo: Pixabay)

Recently, the European Commission selected BlackRock, one of the most powerful financial companies, which manages over €6 trillion in assets, and known to be a key investor in fossil fuels, to provide paid advice on the integration of social and environmental objectives into European banking regulation. Not a good match.

Given the prominent role expected from private finance in the European Green Deal, we seem to be off to a bad start.

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  • The New York HQ of BlackRock (Photo: Wikimedia)

According to the Green Deal, new rules are needed for banks – many of whom are major investors in fossil fuels.

One of the arguments is that the risk inherent in such investments needs to be recognised fully in the rules, if we are to facilitate a transition to a greener economy.

Dirty investments need to be discouraged, green investments must be facilitated.

This makes the coming proposal on the integration of environmental, social and governance related objectives (ESG) into banking regulation, so important.

What BlackRock is now asked to do is to set the agenda for that debate, and they will even be paid €280,000 to influence the reform agenda for the financial sector.

That begs the question how BlackRock can be regarded as a consultant and advisor?

They are awarded contracts from central banks, from governments all over the world and in the EU, it seems they have acquired a special status.

Setting the agenda?

A couple of years back they provided the EU institutions for example with advice on EU stress tests for banks, and even participated in the auditing of banks. It advised the commission on the new EU Individual Retirement Savings Product (PEPP), and can enjoy the benefits of the market is being created.

And now this – a new contract on the environmental, social and social governance (ESG) is a new milestone in the category 'conflicts of interest'.

That's not a bad position for a financial powerhouse like BlackRock which is heavily invested in fossil-fuel companies and banks with big shares in a 'brown economy'.

It is the world's biggest investor in fossil fuels with over $87.3bn in shares across the industry and share holdings in coal plant developers alone are worth $17.6bn.

Crucially, it has a stake in most big European banks. For that, BlackRock has a vested interest in how, for example, environmental objectives are built into European banking rules.

These investments obviously have a bearing on the opinions voiced by BlackRock, and they steer the fund's lobbying campaigns in the European Union and elsewhere.

By itself or in coalitions with other financial giants, it has spoken out consistently against a plethora of moves towards a more sustainable financial system, including some that are intimately linked with the consultancy work it is now paid to do for the commission.

It is not difficult to see the strong conflict of interest, and it can hardly have escaped the attention of the commission.

BlackRock's advice runs the risk of being strongly-biased and could derail the debate on a crucial element of the EU's strategy on sustainable finance.

The fact that BlackRock still won this contract, in spite of already having lobbied against strong rules on sustainable finance in the EU institutions, shows the EU commission accepting and facilitating undue influence from the financial sector.

It follows a classic pattern: the commission seems to believe that the perfect advisers are to be found in the ranks of the very sector that is under discussion.

In this way, the contract is only the tip of the iceberg.

It confirms a pattern that we have to do away with: the inclination of the European Commission to base its legislative proposals on banking regulation from advice from financial giants themselves.

There is now a lot of protest building, both inside the European Parliament and outside.

A group of MEPs from groups representing a comfortable majority have started challenging the commission, and almost one hundred civil society organisations ask in a joint letter, coordinated by the Change Finance coalition, that the European Commission cancels the contract.

Author bio

Kenneth Haar is a member of the Change Finance coalition and researcher at Corporate Europe Observatory.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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