Dive Brief:
- BlackRock, the world’s largest asset manager, said letters sent to the firm by 26 Republican state finance officials in July and 17 Democrat state finance officials in August “continue a concerning trend by both parties of politicizing the management of public pension funds.”
- “Many of our clients value having BlackRock act as an engaged shareholder on their behalf,” S. Jane Moffat, BlackRock’s managing director of U.S. government affairs and public policy, told the finance officials in an Aug. 27 response letter. “At the same time, BlackRock is not an activist investor.”
- BlackRock’s response comes after the state officials painted drastically different views of what they viewed as “fiduciary duty” in their letters. The coalition of Republican state officials urged the asset manager and other financial institutions to stop framing climate change as a long-term risk, while the coalition of Democrat officials looked to push BlackRock and others to reaffirm their commitment to managing climate change and other similar long-term risks.
Dive Insight:
BlackRock’s letter said “the politicization of pension fund management ultimately costs savers and retirees” and that most of the questions raised in the letters ultimately concern the asset manager’s approach to investment stewardship for its clients.
In addition to urging BlackRock and 24 other U.S. financial institutions to stop framing climate change and other “deterministic future outcomes as long-term risks,” the Republican state finance officers sought to have the firms refrain from incorporating net-zero climate commitments, natural capital frameworks or the European Union’s Corporate Sustainability Reporting Directive into their investment strategies.
Democrat state and local finance officials sent their letter to BlackRock and 17 other firms, looking for the firms to reaffirm their commitment to managing long-term climate change, supply chain and governance-related risks. The officials urged the institutions to expand proxy voting opportunities and develop advanced capital oversight tools.
“Fiduciary duty is one of our foundational principles — as an asset manager, we always put our clients and their interests first,” Moffat wrote. “We take this duty seriously and are proud to help 35 million Americans save and invest for retirement, including many who reside in your states.”
Moffat said in the response letter that many of the firm’s clients “believe that shareholder participation also encourages a healthier capital market system and serves as a foundational element of America’s strong capital markets.” However, she distinguished the firm from activist investors by noting that BlackRock doesn’t file shareholder proposals or issue board nominations, or “act collectively with other shareholders or organizations” to vote shares or rely on outside proxy advisory firms.
“Various federal, state, and local regulators monitor BlackRock’s compliance with standards and commitments that require us to refrain from being an activist shareholder,” BlackRock’s Aug. 27 letter said. “We have always complied with these regulations.”
This spring, the Federal Energy Regulatory Commission renewed BlackRock’s blanket authorization to acquire up to 20% of voting shares in some public utilities, with FERC finding arguments that the asset manager was an activist investor “unpersuasive.” BlackRock’s letter to the state officials noted that the agency upheld that finding in early August after a request for rehearing from consumer advocacy nonprofit Public Citizen.
FERC’s Aug. 6 determination ultimately affirmed its reauthorization of BlackRock’s blanket authorization and separately rejected a joint appeal from a coalition of Republican state attorneys general and conservative nonprofit Consumers’ Research as untimely.
