BLACKROCK CONTRIBUTES MORE TO CLIMATE CHANGE THAN ALMOST ANY OTHER COMPANY ON EARTH.
As Amazon burns BlackRock emerges as world’s largest investor in deforestation
The world’s largest institutional investor with US $6.5 trillion in assets is a global leader in financing forest destruction, new report says
By DTE Staff (*) - 31 August 2019
With the Amazon going down in flames, a report released on August 30, 2019 claimed that BlackRock Inc — the world’s largest institutional investor with $6.84 trillion in assets under management (AUM) — was heavily invested in companies most responsible for the destruction of tropical forests in the Amazon and around the world.
The Report, released by Amazon Watch, Friends of the Earth US and Profundo, a Dutch financial research firm, claimed the New York-based BlackRock was among the top three shareholders in 25 of the world’s largest publicly listed deforestation-risk companies — companies active in producing and trading soya, beef, palm oil, pulp and paper, rubber and timber. The corporation was also among the top 10 shareholders in 50 of the world’s top deforestation-risk companies.
BlackRock’s investments in select companies were primarily through index funds — and the holdings are on the rise. In 2014, 80 per cent of BlackRock’s deforestation-linked commodity holdings were through index funds; by 2018, it had increased to 94 per cent. This trend potentially increases financial risk, as ESG-related issues are not measured, managed or mitigated by market indexes.
ESG (Environmental, Social and Governance) funds have been linked to recent deforestation, land rights conflicts, and child and forced labour. The Norwegian Government Pension Fund has blacklisted several of these companies due to ongoing environmental and human rights violations.
According to the report, BlackRock’s holdings in these sectors increased by more than $0.5 billion since 2014. “The data is clear: from the Amazon to the great forests of Africa and Southeast Asia, BlackRock is a global leader in financing forest destruction,” said Jeff Conant, senior international forest program manager with Friends of the Earth US, the report’s lead author.
“As long as this financial behemoth continues to unconditionally back the world’s most destructive agribusiness companies, the forests of the world, and consequently the climate and the rights of forest-dwelling people, will continue to go up in flames. BlackRock is literally reaping profits as the world’s jungles burn,” he added.
A growing number of institutional investors understand the urgency of addressing climate-related risks. In June 2019, 477 institutional investors (with $34 trillion in AUM — nearly half of the world’s invested capital) urged world leaders to dramatically increase efforts to meet Paris Agreement goals.
While the greatest attention regarding the climate crisis is justifiably given to the energy sector, deforestation accounts for some 15 per cent of global greenhouse emissions, and industrial agriculture is responsible for around 80 per cent of deforestation — making a rapid transition away from commodity-driven deforestation crucial to addressing the climate crisis.
Fiduciary duty to clients is one factor driving institutional investors to address deforestation and the larger climate crisis. A growing body of literature argues that the asset managers holding proportionately substantial shareholdings must consider short- and long-term impacts of social and environmental risk factors when carrying out their fiduciary duty.
“BlackRock claims that its hands are tied by index funds. It is wrong. BlackRock can follow the lead of other global asset managers and make change for the good of the rainforest, the climate, and of its customers by shifting investments out of companies wrecking the planet, and applying maximum pressure to change company behavior,” said Moira Birss, Finance Campaign Director of Amazon Watch.
“The fires currently raging in the Amazon clearly demonstrate the risk that agribusiness expansion poses for the Amazon rainforest, indigenous peoples, and the global climate. By expanding investments in the very industries complicit in that destruction, BlackRock is emboldening right-wing President Jair Bolsonaro to continue his quest to raze the Amazon for profit-making,” Birss added.
Earlier this month, the Intergovernmental Panel on Climate Change reported that deforestation and destructive land use practices are responsible for nearly a quarter of greenhouse gas emissions. But rather than taking action to address the risks of catastrophic climate change, BlackRock’s investments in deforestation have been on the rise, the new report reveals.
While leading pension funds such as CalPERS recognised deforestation as a material investment risk, BlackRock has reportedly taken no such actions, despite the public statements by CEO Larry Fink that companies need to have a “social purpose”.
“Responsible stewardship is about more than just nice public statements. It is about aligning your investment strategy with broadly accepted environmental and social standards,” said Ward Warmerdam of Profundo. “It is about implementing this strategy by making demands of the companies you are invested in. And it is about using your significant leverage to ensure that your demands are met and irreversible environmental and social damage is prevented, in addition to fulfilling your fiduciary duty.”
BlackRock has also come under fire for its disproportionately large holdings in coal, oil and gas at a time when the finance sector is facing growing climate risk.
(*) DTE has sought BlackRock's comment, but is yet to recieve any.
Many of the same groups behind the call for a global Amazon Day of Action" on September 5th have issued a set of demands for the private sector to take responsibility for its pivotal role in the forest destruction unfolding across South America that has captured the attention of the world.
The rapidly growing coalition of groups, which includes Friends of the Earth, Amazon Watch, Rainforest Action Network, ECOTERRA and others, issued the following statement about the corporate actors involved in Amazon rainforest destruction:
"Brazilian President Jair Bolsonaro certainly deserves the primary blame for the fires currently burning in the Amazon, given his violent, regressive, and racist policies and his explicit encouragement to ‘open the Amazon for business'.
"But multinational corporations helped create these conditions for profiteering at the expense of the lungs of the earth – and these same companies are poised to profit further as today's fires open up the door for tomorrow's plantations and ranches."
In a communique titled An Open Letter from Civil Society to the Global Finance Community, we declare "The fate of the Amazon is the fate of the world. Today we call on you, the banks and institutional investors that provide debt and equity financing, to use your money, which in many cases is our money, to directly challenge Bolsonaro's destructive agenda in Brazil. We call on you to immediately suspend all financing to agribusiness firms active in the Brazilian Amazon and the Cerrado until and unless you can take longer term, systemic actions to…" resolve this crisis.
"Global commodity traders like Cargill, JBS and Mafrig are the key drivers of deforestation in the Amazon. Their products are then sold by retailers like Leclerc, Stop Shop, Walmart and Costco. And behind the commodity traders stand the banks and institutional investors providing the credit and equity financing that enables their expansion into the Amazon: firms like BlackRock, JPMorgan Chase, Santander, BNP Paribas, HSBC and others. These financiers not only enable the destruction of our forests – they profit from it.
READ ALSO: Worst Company In the World: Cargill
"The crises facing the Amazon require innovative solutions that address the root of the problem. The stakes are simply too high to accept half measures or surface-level solutions. It is time to name names: to identify the worst actors operating in the Brazilian Amazon, as well as the global companies and financial institutions that enable them, and to demand immediate reform and accountability on the part of the Bolsonaro regime.
"Global solidarity with Brazil's movement for social and environmental justice is more critical now than ever. While we acknowledge the North's role in environmental mismanagement, human rights abuses, and climate change, we believe that through informed choices, the European and North American private sector and engaged citizens in the region can considerably influence the destructive agenda of the Bolsonaro government."
Asia Monitor Resource Center and Sawit Watch, both forest research groups, recently published a report based on research done in 2017 on three plantations owned by Golden Agri-Resources in Central Kalimantan province, Indonesia. On every plantation they researched, they found serious human rights and labor rights abuses, including occupational health and safety problems, low wages, poor living conditions and systemic gender discrimination. This is especially troubling as GAR, the world’s second largest palm oil company, is a signatory to the U.N. Global Compact, and has adopted — but failed to adequately implement — its own No Exploitation policies.
AMRC and Sawit Watch also found that RSPO audits fail to capture actual labor practices. An investigation of two GAR subsidiaries revealed that the company instructs workers on how they must respond to RSPO auditors to ensure they tell the RSPO what the company wants the RSPO to hear. This is just one way that companies evade RSPO criteria as well as legal labor standards.
Another GAR-related company, Golden Veroleum Liberia, has nearly a decade’s worth of allegations against it. Most of these allegations were affirmed by a 2018 RSPO decision that coincided with the report, “High Risk in the Rainforest,” published by Friends of the Earth groups in Liberia, the Netherlands and the U.S. Golden Veroleum appealed the RSPO decision — and when the appeal was denied, the company quit the RSPO altogether.
In December 2013, Wilmar, the largest palm oil trader in the world, became the first trader to adopt a NDPE policy, not just within its own operations but also those of its suppliers. According to a new report by Greenpeace, “The Final Countdown: Now or Never to Reform the Palm Oil Industry,” Wilmar’s operations still have not fully complied with this policy. Some of its concessions have unresolved land conflicts that include ongoing physical violence and the shooting of two farmers in December 2017. Additionally, Wilmar is currently facing serious allegations of worker exploitation, including forced labor.
A policy is only as good as its implementation. According to Greenpeace’s “The Final Countdown,” the entire industry is failing to implement its sustainability policies. The report reveals that large palm oil traders have:
- failed to establish useful systems for enforcing No Deforestation commitments;
- failed to verify that their supply chains are fully compliant with these commitments;
- failed to require producers in their supply chains to disclose the extent of their operations;
- failed to ensure that companies in their supply chain remedy non-compliant behavior; and
- failed to monitor their supply chain proactively and remove rogue companies.
The palm oil industry has demonstrated it is unable or unwilling to change its unsustainable ways. One thing this failure makes clear is that investors in the industry, like BlackRock, are doing little to drive improvements despite all their talk.
BlackRock is the largest U.S. financier of palm oil. Besides a handful of interests directly beholden to GAR’s owner (one of Indonesia’s most powerful families), BlackRock is also among the top three largest U.S. investors in GAR. But judging by the actions of the company, BlackRock is failing to hold this company — or any of its palm oil investees — accountable.
Enabled by BlackRock’s money, dirty palm oil continues to be produced, traded and consumed with no consequence — and rampant deforestation continues to drive rapid climate change. If BlackRock claims to care about climate change, it needs to address its big palm oil problem.
To learn more about BlackRock’s big climate problem, go to: https://www.blackrocksbigproblem.com/
BlackRock's Big Problem: Amazon Destruction
BlackRock, the world's largest investment firm, has more money invested in the fossil fuel and agribusiness industries – the biggest drivers of climate change – than any other company in the world. That means that BlackRock's portfolio constitutes a huge liability for putting the planet on a path towards runaway climate change.
BlackRock's portfolio includes many companies operating in the Amazon; companies whose operations both contribute to rainforest deforestation and run roughshod over the territorial rights, health, and ways of life of the hundreds of indigenous peoples with unique languages and cultures who live in relyon the rainforest for their livelihoods and wellbeing.
These companies wouldn't have the primary tool they need – money – to drill for oil in indigenous territories in the Amazon rainforest were it not for the financial backing of investment firms like BlackRock.
BlackRock Invests in Amazon Oil Drilling
In the western Amazon Basin, oil and gas blocks cover at least two-thirds of the rainforest. Existing and proposed oil and gas blocks cover 280,000 square miles, an area larger than the state of Texas. Many of these blocks are in very remote areas, meaning that oil drilling requires building new roads and rainforests deep into the rainforest. This both causes deforestation and paves the way for further rainforest destruction from illegal logging, new settlements, and more.
BlackRock invests in several companies that hold licenses to explore and/or drill in the Western Amazon's fossil fuel frontier in blocks on or near the territories of indigenous nations that have not been properly consulted or have explicitly rejected the presence of oil drilling on their land.
BlackRock Invests in Amazon Agribusiness
In the Brazil, the largest Amazonian country, a forested area about the size of Dallas, TX is being lost every month, mostly to make way for the expansion of agricultural commodities like soy and beef. When forests are slashed and burned, a biologically and culturally ecosystem becomes a wasteland overnight.
BlackRock is major investor in the parent companies of Brazilian agribusiness firms that produce wood chips for paper products, soy, wheat and other agricultural commodities. Many of those Brazilian firms are owned by wealthy Brazilians who have used their political and economic influence to strip protections for forests and land rights in the Amazon.
BlackRock's Big Problem Campaign
Meanwhile, BlackRock's CEO, Larry Fink, travels the world saying that businesses should have a "social purpose," play a positive role in society, and think "long term." Larry Fink wants to be thought of as a socially-responsible corporate leader, but BlackRock refuses to divest from tar sands, coal, Arctic oil, Amazon crude, and rainforest destruction, and it votes against shareholder demands for climate action and transparency. That is not social responsibility.
This hypocrisy and continued financing of the industries causing climate change is a BIG Problem. That's why we joined with the Sierra Club, Friends of the Earth, and the Sunrise Project to launch a new campaign: BlackRock's Big Problem. We're calling on BlackRock to stop working with companies that destroy the climate and our precious ecosystems like the Amazon.
For more information:
- Follow the BlackRocks Big Problem campaign on Twitter and Facebook
- Press release: BlackRock Receives Over 122,000 Petition Signatures Calling for Divestment from Amazon Oil
- Press release: U.S. Senators Send Letters to BlackRock and JPMorgan Chase on Amazon Crude
- Senators Schatz and Whitehouse's letter to BlackRock
- Coverage related to BlackRock's investments in Amazon destruction
BlackRock Deforestation Demonstration
Alfred Brownell, a Liberian human rights lawyer and recipient of the 2019 Goldman Environmental Prize for Africa, and a group of environmental activists protested at the San Francisco headquarters of global asset manager BlackRock. BlackRock is complicit when it funds massive deforestation, dirty coal and suffocating fossil fuel that undermine critical ecosystems and endangered species.
The Ellen MacArthur Foundation announced in 2019 that BlackRock has become a Global Partner of the Ellen MacArthur Foundation combining the investment capabilities of one of the world's largest asset managers with the Foundation's circular economy expertise. The partnership will aim to develop a greater understanding of how investments can accelerate the transition to a circular economy and unlock significant economic, environmental and societal benefits.
A brave partnership! NGOs certainly are useful for delivering reputational cover to mainstream corporate/FS players. But NGOs can also be the catalyst for culture change on core activity ie going beyond the specific programme. The trustees and senior execs are key.
So this will be a very interesting partnership to watch.
I hope the decision-makers at Ellen MacArthur Foundation will consider informed critical views of their new partner:
By Raj Thamotheram - March 2019 (Magazine)
Donald Trump is not the only US leader to ignore the climate emergency. BlackRock’s 2019 letter to companies, timed to coincide with Davos, is not quite the State of Union address but it was equally silent on the crisis.
That did not stop the media from gushing about the ‘Fink effect’, and how unusually decent he is. That may be so, but it is totally irrelevant given the disconnect between acknowledgement and action. The world’s largest asset manager has unrivalled influence with investee companies, and had assets under management of $5.98trn (€5.3trn) as of the end of 2018. In addition, BlackRock’s risk platform Aladdin influences the management of around $20trn, or 10% of the world’s financial assets.
Systemically important asset managers, a description mega managers seek to avoid, have taken a disappointing approach to stewardship. In an op-ed focused on the company’s actions on pay, New York Times columnist Gretchen Morgenson wrote that “BlackRock wields its big stick like a wet noodle”.
It really is irrelevant that Fink is a decent CEO or even a life-long Democrat who regularly attends the World Economic Forum.
Public hand wringing about populism is pointless> What matters is the gap between walk and talk: few independent commentators doubt that levels of inequality last seen in the early 1930s are the main cause of the populist backlash.
The same knowing-doing gap is clear with the climate crisis. To his credit, Fink has answered critics directly. The firm’s case rests on four points, all of which have superficial plausibility but none of which stand up to detailed scrutiny.
● Private engagement by a firm as big and informed as BlackRock is more impactful than voting, especially given the increase in ESG staff. But given the number of investee companies, BlackRock would need several hundred, if not a few thousand, ESG staff to carry out stewardship properly. Traditional investment professionals, recruited and nurtured to be stock pickers, cannot be magically re-purposed to engage on systemic risks. Furthermore, other top 10 managers are able to vote against management – it is not an either/or choice.
● There is not yet clear evidence that stronger action on ESG issues – including climate change – is warranted. This confuses backward-looking research on share price movements with a forward-looking systemic risk assessment informed by science and increasing financial evidence of value destruction from ignoring the low carbon transition (for instance, European energy utilities). However brilliant BlackRock’s quants are, they will not see in their charts what has not yet happened.
● The focus on climate is something that US concepts of fiduciary duty make illegal and EU ‘values’ cannot drive US voting. Fink is either getting bad advice about the current application of fiduciary duty in the US or he is using fiduciary duty as an excuse for placing the short-term interests of companies and investors above beneficiaries. The fiduciary duty of loyalty does not need a blinkered focus on short-term portfolio returns, without consideration and management of beneficiaries’ related long-term and systemic risk exposures. And while the Republican elite has largely been captured by climate denialists, most Americans accept anthropogenic climate change and want action. That is US values are not monolithic. So US asset managers need to choose – do they want to be science-led and international or sing to the tune of extreme ideologues?
● BlackRock is taking part in all the collaborative initiatives that matter. The implication, given that BlackRock is not yet a signatory, is that ClimateAction100+, representing more than $32trn in AUM or about a quarter to a third of most FTSE and Dow Jones listed companies does not matter.
Currently this debate has been happening in circles that are too small to worry mega managers but that is changing. When Preventable Surprises launched its #Missing60 campaign in 2016 – highlighting how some fund managers were willing to ask European oil majors to disclose climate risks but were happy to support US counterparts that did not – we were ahead of the curve.
Now, 12 campaigning groups have signed a public letter challenging BlackRock. Perhaps even more significantly in terms of the public, 2019 will be remembered as the year that BlackRock was targeted by Yes Men (advertising activists who came to fame over the Bhopal disaster). They circulated a carefully written missive purportedly from BlackRock, which tricked leading journalists. The contrast between what Fink should have said, but actually did, was embarrassing.
So is America devoid of leadership on the climate front? Fortunately not. The Green New Deal is a bold and systemic response. A decade ago, Democrats tried to pass a more Republican friendly cap-and-trade plan, but it ran into a “wall of intransigence and fossil-fuel-industry-funded denialism” in the words of the Washington Post.
Will the politics of the Green New Deal – first neutralise corporate capture, then address the decarbonisation challenge – work? Some right-wing commentators seem to think so, arguing that Republicans need to “find a better idea or lose”.
So BlackRock and its peers have a choice. They can be like polemicists who argue that climate change is similar to poverty – a serious problem but one that should not involve any action that might disrupt an allegedly working system. But that incrementalism is the new climate denialism.
Who can change things? Senior executives could, but are unlikely to rock the boat. Personal career risk is more important than the climate emergency. Asset owner clients who consider themselves climate aware, but who say little about how their investment supply chain operates are powerful enablers of incrementalism. And so too are committed campaigners who ignore the mega managers to focus on smaller investor targets who can be pushed to divest from fossil fuel stocks.
As the FT noted in a December 2018 editorial: “The depressing reality about climate change is that we could solve the problem, at manageable cost, but are failing to do so. This failure is due to a mixture of blindness and self-deception. The blindness comes from those, such as US president Donald Trump, who deny the reality of climate change. The self-deception comes from those who accept the reality, but only pretend to solve it.”
C’mon BlackRock! Time to get your finger out!