This page has now been updated with embedded audio at the foot.
A close reading of a letter from nineteen US states that takes investment giant BlackRock to task for putting its Environmental, Social and Governance goals (ESGs) ahead of the best possible investment returns for American citizens reveals that BlackRock—which, along with Vanguard and State Street, is one of the “big three” in the index fund management field—is literally setting policy and governing the world in key ways.
This position is clearly spelled out in the letter (UK Column mirror) by the Attorneys-General (AGs) of the following states: Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Ohio, South Carolina, Texas, Utah, and West Virginia. They write in the interests of the state employees whose pensions are invested by BlackRock.
This matter was first reported on the 5 August 2022 broadcast of UK Column News by Alex Thomson of Eastern Approaches, in the segment beginning at 16:14. The present article provides more details on the reality of private governance—craftily portrayed as “seeking dialogue” by BlackRock in this particular case—and on how it circumvents, or even usurps, governmental action by elected legislators.
Funds as bullies
The AGs’ detailed eight-page letter was collectively sent to BlackRock Inc.’s CEO Laurence (Larry) D. Fink on 4 August. It represents a significant revelation of BlackRock’s meddlesomeness. Signed by the chief law officers of 38% of the states in the Union, the letter does not mince words. Its second paragraph states:
Based on the facts currently available to us, BlackRock appears to use the hard-earned money of our states’ citizens to circumvent the best possible return on investment, as well as their vote. BlackRock’s past public commitments indicate that it has used citizens’ assets to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States.
These agreements have never been ratified by the United States Senate. The Senators elected by the citizens of this country determine which international agreements have the force of law, not BlackRock. We have several additional concerns that fall under our jurisdictional authority as attorneys general.
The AGs’ letter also notes that Mark McCombe, BlackRock’s chief client officer, recently wrote to several US states to describe BlackRock’s “position on energy investments with respect to [state] pension funds. Mr. McCombe’s letter contains many statements that appear to conflict with BlackRock’s previous public statements and commitments.”
Moreover, while McCombe’s letter had claimed that BlackRock is neutral on energy questions, and simply offers clients a range of energy-sector investment options, these AGs aren’t buying it, saying that this claim of neutrality
[. . .] differs considerably from BlackRock’s public commitments which indicate that BlackRock has already committed to accelerate net zero emissions across all of its assets, regardless of client wishes. BlackRock joined the Net Zero Managers Alliance (“NZAM”), which, among other things, directs members to “acknowledge that there is an urgent need to accelerate the transition towards global net zero emissions and for asset managers to play our part to help deliver the goals of the Paris Agreement.
Note the key phrases “accelerate the transition” and “to help deliver the goals” of the Paris Agreement—a pact which, according to the Center for Climate and Energy Solutions (CCES), “entered into force on November 4, 2016. Other countries have continued to become parties to the Paris Agreement as they complete their domestic approval procedures. As of January 2021, 190 parties have ratified the Paris Agreement [. . .] On January 20, 2021, President Biden signed an Executive Order to rejoin the Paris Agreement.”
That was done in the wake of then-President Trump’s 1 June 2017 announcement of his administration’s “intention to withdraw” the United States from the agreement. While Biden may entertain delusions to the contrary, no president can actually ratify a treaty with an executive order. That is the sole domain of the Senate.
Mayors as diplomats
The CCES (also abbreviated as the C2ES) is agitating to call the shots, citing what this UK Column writer has been researching for seven years: the formation of “global cities” whose mayors increasingly see themselves as national and international officiators, well beyond their lawful and traditional local municipal functions.
Like BlackRock, but with less brazenness, the mayors of subnational administrations are prone to sidestep the nation state. The CCES, although it does understate the designs of dozens of major self-proclaimed “global cities” around the world to operate on internationalist principles and support global accords—even when these are at odds with domestic customs and state or national laws—nevertheless notes:
In response [to Trump’s withdrawal from the Paris Agreement], other governments strongly reaffirmed their commitment to the agreement. U.S. cities, states, and other non-state actors also reiterated their support for the agreement and pledged to continue to enhance their climate efforts. The United States formally initiated its withdrawal from the agreement on November 4, 2019; the withdrawal took effect on November 4, 2020.
Bookkeepers as gamblers
The letter from the AGs to BlackRock also makes the wry observation that, in the investment field, “rather than being a spectator betting on the game, BlackRock appears to have put on a quarterback jersey and actively taken the field.” The letter adds:
As a firm, BlackRock has committed to implementing an ESG engagement and voting strategy across all assets under management, and held over 2,300 company engagements on climate, the most of any category of engagement. BlackRock took voting action against 53 companies on climate issues, with 191 companies put on watch.
A governance engagement strategy, primarily focused on BlackRock’s climate agenda, necessarily overlays ESG factors on the core index portfolios that comprise a substantial part of many state pension funds. BlackRock’s engagement strategy, in which a net zero climate agenda is a significant or main consideration, would covertly convert states’ core index portfolios to ESG-focused funds should the SEC’s recently proposed definition of an ESG fund be adopted.
And what is the proposed ESG fund definition maintained by the SEC, the US market regulator referred to above? Although the AGs’ letter does not state it, the SEC, via the federal government’s rule-making process whereby proposed agency rules are published in the US Federal Register—at which point, any proposed rule is open to public comment for a specified time period—has already described it as follows, in typical bureaucratic parlance, in a May 2022 online bulletin:
The Securities and Exchange Commission [. . .] is proposing to amend rules and forms under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to require registered investment advisers, certain advisers that are exempt from registration, registered investment companies, and business development companies, to provide additional information regarding their environmental, social, and governance (“ESG”) investment practices.
The proposed amendments to these forms and associated rules seek to facilitate enhanced disclosure of ESG issues to clients and shareholders. The proposed rules and form amendments are designed to create a consistent, comparable, and decision-useful regulatory framework for ESG advisory services and investment companies to inform and protect investors while facilitating further innovation in this evolving area of the asset management industry.
In other words, the US Government wants better disclosure to investors about ESG investments, but does not appear to take much issue with the ESG goals themselves, though one wouldn’t necessarily expect the federal government to take a stance either way on ESG. Yet this measure evidently raises the bar a little higher in terms of the legal-disclosure hurdles which BlackRock must clear as it seeks to funnel gargantuan sums of money into its pet ESG goals. Despite this, the door is left open for “further innovation”.
Activists as authorities
It is also highly noteworthy that the AGs’ letter raises the matter of BlackRock having joined “climate change advocacy organizations”. BlackRock had said it had joined them to “participate in dialogue with governments, companies, and financial institutions on sustainability issues important to our clients.” In response, the AGs write:
Under our state laws, the desired “dialogue” regarding any potential energy transition would be how to maximize financial returns, which would potentially include the opportunistic purchasing of fossil fuel assets discarded by companies seeking to meet net zero commitments. However, any discussion of purchasing such assets to maximize returns is conspicuously absent from GFANZ or Climate Action 100+.
The AGs, citing the BlackRock-GFANZ connection, point out that BlackRock is engaging in “activism rather than dialogue”, as evidenced by the following GFANZ Steering Committee statement of which the AGs reminded Mr. Fink:
The systemic change needed to alter the planet’s climate trajectory can only happen if the entire financial system makes ambitious commitments and operationalises those commitments with near-term action. That is why we formed [GFANZ], to bring together over 450 leading financial enterprises united by a commitment to accelerate the decarbonisation of the global economy.
Notably, GFANZ is the Glasgow Financial Alliance for Net Zero. It was launched in April 2021 by UN Special Envoy on Climate Action and Finance (and former governor of the Bank of England and Bank of Canada) Mark Carney. The COP26 summit, or Conference of the Parties, was hosted by the UK in Glasgow in the autumn of 2021. COP26, in partnership with the UN-backed Race to Zero campaign launched by UN High-Level Climate Champions Nigel Topping and Gonzalo Muñoz, seeks to “unite net-zero financial sector-specific alliances from across the globe into one industry-wide strategic alliance,” according to the GFANZ website.
That is clearly a mechanism for a one-size-fits-all juggernaut to thwart governmental regulations of any substance and then privately to govern the financial system on the basis of a flimsy climate ideology posing as science. BlackRock, as the AGs rightly worry, is a member of the steering committee of GFANZ and is affiliated with Climate Action 100+, which is an investor-led initiative to attempt to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
Pattern of machinations
While the AGs note that BlackRock “has chosen to lead detailed, comprehensive efforts to retire fossil fuels” and “appears to have determined that every company should support the Paris Agreement without exception” even though many state pension funds include traditional energy investments that should not be simply disregarded, they also accuse BlackRock of “squelching political speech” that may impart different opinions on energy sources and related investments.
This, the AGs insist, is the action of an “activist” company “whose mind is made up, not that of a neutral fiduciary seeking ‘dialogue.’” To this, the AGs add: “Acting with mixed motives triggers an irrebuttable presumption of wrongdoing.”
On behalf of the signatories, Nebraska Attorney-General Doug Peterson noted that “BlackRock manages over $10 trillion in investment funds. This includes money from several state retirement plans,” in published remarks that comport with the views of the other 18 AGs. He went on:
BlackRock’s fiduciary duty is simple, it is to maximize the return for current and future retirees and the value of other invested state funds. BlackRock’s duty is not to try to force companies to undermine profits or needlessly expend capital in order to conform with BlackRock’s social and environmental view of the world. Rather BlackRock’s duty is to invest in well-run businesses and enhance the value, not only in the long term but also the present of the retirement accounts of Nebraska’s teachers, judges, and other state employees.
The Washington D.C.-area journal Politico, back in January 2022, noted:
West Virginia last week said it would pull out of a BlackRock Inc. investment fund, making it the first state to cut ties with a firm over its ESG policy. West Virginia Treasurer Riley Moore, a Republican, said he can’t do business with a company whose investment strategies harm fossil fuel companies.
“These folks aren’t policymakers,” Moore was quoted as saying. He continued:
What if the shape of society that BlackRock wants is not what we want, what West Virginia wants, what other states want, what probably most Americans want? People aren’t voting for this at the ballot box. They’re using their massive amount of corporate power and capital to coercively push their views of the world onto the rest of us.
What Moore apparently doesn’t fully realize, however, is that BlackRock’s brazen financial and social governance is not a mere isolated act of outlawry, but rather is fully consistent with the core plan of private central banks (and their spawn in the corporate world) since their inception. That plan is to sack the nation state and its subdivisions by owning the debt and, from there, eventually commandeering the entire financial infrastructure. The social and political ramifications are beyond immense.
Whenever nations are saddled with private central banks that issue every currency unit in the form of interest-bearing debt, the stage is set for the dissolution of nation states. The first order of remedial business would be to undo this state of affairs, lest the financial overlords continue ruling national governments—which, in turn, institute tyranny on behalf of their creditors.
UK Column will keep readers abreast of any response that BlackRock may issue to this stinging inquiry into its practices.
Private Governance and the "Power of Twelve": In the above brief podcast, Mark Anderson expounds on the concerns of 19 American Attorneys-General (chief law officers of states) who wrote to BlackRock CEO Larry Fink over concerns that the world's top index-fund management companies are becoming too powerful and engineering the world according to a a global agenda and not for the best possible investment returns for US pensions.
Out of this analysis emerges serious concerns that "Twelve Emperors"—funds including BlackRock, State Street and Vanguard—could soon rule the world in several key ways, as warned of by Harvard's John Coates and even the Financial Times.