BlackRock under increased scrutiny as it continues to push its ESG goals

Larry Fink knows better than you.

At least, that is the message the world’s largest asset manager is sending following the January letter announcing BlackRock’s shift towards ESG activism. Fink threatened to use the firm’s massive influence to undermine boards that do not adhere to BlackRock’s agenda, saying, “we will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.” The evidence indicates that this was no empty threat. The financial giant voted against board recommendations at more than 30% of first-quarter shareholder meetings this year, casting doubts that BlackRock trusts companies to run themselves.

Meanwhile, BlackRock’s clout in Washington is catching up to its Wall Street prestige. Bloomberg hailed the firm as the “fourth branch of government” after it took on a role as an advisor to the Federal Reserve as the central bank struggles to alleviate the effects the COVID-19 pandemic has had on the U.S. economy. Money has always bought power in Washington—and BlackRock certainly has money—but turning to a company that has so publicly stated that their top priority is no longer delivering value to its clients during a time of crisis is cause for concern. 17 members of Congress think so, at least. The cohort of Senators recently wrote to Treasury Secretary Steven Mnuchin imploring the Treasury to ensure that the government remains “neutral and free of bias” as it seeks to stabilize the U.S. economy.

Despite BlackRock’s very public revelatory moment, the company is facing criticism for failing to live up to its own agenda.  The asset manager has come under fire for its growing interest in Chinese investments despite the country’s abysmal environmental record.  Climate change activists are beginning to question BlackRock’s commitment to promoting sustainability, and not just due to the firm’s Chinese designs. BlackRock did not back environmental resolutions at two major Australian oil companies in an apparent break from their stated ESG goals, leaving many to wonder how much of BlackRock’s new agenda is genuine and how much is simply than posturing for good press.

This conflicting behavior spells trouble for corporate boards and shareholders. BlackRock’s commitment is unclear, save for its commitment to throwing its weight around when it suits its management team, leaving decision makers to speculate how one of the world’s largest investors will come down their operations in a time when their biggest goal is simply to right the ship. With proxy voting season upon us, boards should expect to dance around an agenda known only to BlackRock.

Maybe Fink does know better, because no one else knows quite what to think about BlackRock’s record lately.