BlackRock Doubles Down on ESG While Others Exit

February 15, 2024

Quick: What retreats and advances at the same time? Asset managers and ESG.

The big news today is that JPMorgan Chase and State Street are exiting Climate 100+, which numerous state attorneys generals have characterized as a climate cartel that violates the Sherman Act’s prohibition against the “restraint of trade.” The targets in this case are traditional energy industries that have driven much of the market’s gains in recent years. The absence of fossil fuel investments has generated comparative losses for millions of mom-and-pop investors. 

JP Morgan said it made this move because it had grown its own “investment stewardship capabilities” with “40 dedicated sustainable professionals.” Let us hope that these 40 professionals are better fiduciaries than the climate activists, many of whom have worked overtime to put the companies they invest in out of business. This would be an odd business model, if it were in fact about business, which it isn’t.

State Street ended its relationship with Climate 100+ on a more critical note. The activist network demanded that signatories like State Street to buttonhole policymakers to reduce carbon emissions and publish details of communications with companies they invest in. In short, Climate 100+ wanted asset managers to become climate lobbyists and to wear the legal equivalent of a wire in all their corporate meetings. Those would also be odd practices for fiduciaries, if in fact Climate 100 + was about helping these companies to act as fiduciaries.

Vanguard, which never joined Climate 100 +, has lived up to its prescient name. Meanwhile, Larry Fink’s BlackRock is in the rearguard, heading in the opposite direction like Wrong-Way Corrigan, who was denied permission to cross the Atlantic but nevertheless flew from Brooklyn to Ireland “by accident.” 

Bloomberg reports that during this tough period in the two-decade history of ESG investing, “BlackRock’s ESG-related assets under management swelled 53 percent from the beginning of 2022 through the end of last year, according to data provided by Morningstar Direct. Over the same period, the wider ESG fund market grew only about 8 percent. The money manager now oversees roughly $320 billion of ESG funds, more than any other investment firm in Europe, the US or globally.”

This cements the case that Larry Fink’s move away from talking about “ESG” was all about branding. He is gambling that somehow forcing people to buy Chinese solar panels made with slave labor and manufactured on a coal-based grid will somehow prove more profitable than investing in LNG exports that help the world reduce its carbon profile.

Going forward, we will watch BlackRock and Climate 100 + as closely as ever. Thanks to Fink’s leadership, BlackRock will bear enormous antitrust scrutiny by the states. ESG skeptics should also watch that JP Morgan and State Street make an honest assessment of environmental trade-offs in their portfolios, and not internalize the ideological fervor of the climate cartel’s religion.

The good news is that today’s actions show a growing recognition that the ESG cartel is an antitrust violation and a legal liability no fiduciary should want.