February 26, 2019
Jeff Hauser and Eleanor Eagan
The American Prospect, February 26, 2019
Fake environmentalism is an especially rampant and worrisome form of corporate propaganda—indeed, there is even a specific term for it. Scientific American defined the “essence” of “greenwashing” as efforts “falsely conveying to consumers that a given product, service, company or institution factors environmental responsibility into its offerings and/or operations.” If you want an idea of how empty these promises tend to be, consider that Donald Trump once signed a “Business Leaders” letter in The New York Times urging then-President Obama to aggressively push for climate action at the 2009 Copenhagen talks.
One of America’s leading greenwashing companies is BlackRock. BlackRock has combined greenwashing public-relations efforts with revolving-door hiring practices to present themselves as fighting climate change even as their company’s practices are making it even less likely our society will respond to the climate crisis.
Though it might not be readily apparent, the decisions of asset managers are central to climate change. As the world’s largest asset manager, controlling just under $6 trillion in assets, BlackRock manages massive investments in corporations around the world. Those investments give BlackRock both economic clout and, in theory, decision-making power on corporate boards.
BlackRock CEO Larry Fink’s 2018 Letter to CEOs ruffled feathers by stating that BlackRock would consider withdrawing support from companies that failed to demonstrate that they also serve a social purpose, in addition to generating profits. Commentators marveled that Fink would be so bold.
A year later, however, it had become clear that his were words empty of any meaning other than marketing. With only 12 years to avert climate disaster, BlackRock’s big move has been creating a set of “green” Exchange-Traded Funds (ETFs) to give investors more sustainable-investment options. In 2018, however, green ETFs only represented 3 percent of the firm’s assets under management. Three percent is a far cry from activists’ calls for BlackRock to green all of its holdings.
That such a small fraction of BlackRock’s investments are in sustainable funds would be alarming by itself. It turns out, however, that these green funds are anything but. Scratch off the greenwash and you will find investments in coal, pipelines, oil, and gas.
In fact, far from scaling down its investments in polluting industries, BlackRock has increasedits holdings in coal companies and is the world’s largest investor in new coal plants. The consensus against coal has only been strengthened in recent years, especially as the priceof renewable energy has fallen below that of coal. In the face of these developments, BlackRock’s investments are indefensible.
BlackRock, however, has not only failed to adequately change its investment strategy to respond to climate change, but also used its voting power to obstruct climate-change initiatives.
BlackRock typically fails to support shareholders’ efforts to force companies to disclose their climate-related risk. A study by 50/50 Climate Project found that BlackRock only voted to support 23 percent of shareholders’ climate and political influence–disclosure proposals, lagging significantly behind its peers. Furthermore, it voted for management’s director nominees nearly 100 percent of the time, despite calls by some investors to vote out directors who fail to prepare their firms for climate change’s effects.
As outlined above, many corporations have claimed the green label without deserving it in any practical sense. Nonetheless, BlackRock’s centrality to the climate crisis does lead one to question why its claims have not undergone much scrutiny, especially within the corridors of power. One answer? BlackRock has ingeniously hired former government officials with wells of political capital in the climate-change movement to lend credibility to its claims.
BlackRock may be one of the savviest practitioners of the revolving door, having had over 100 people move from the firm to government positions and vice versa. Most interesting from an environmental perspective was hiring former Obama adviser Brian Deese to lead BlackRock’s Sustainable Investing group in 2017. Deese was a longtime Obama White House staffer who rose to the position of senior climate adviser to the president—indeed, he was one of the negotiators for the Paris climate accord.
Thanks to his role in the 2015 agreement, Deese has significant credibility on how to fight climate change. Additionally, Deese was one of the best-liked Obama administration officials among progressives in Washington, including environmentalists. On the surface, hiring Deese could have been a sign that BlackRock is getting serious about facing its role in driving global warming.
Unfortunately, its record since Deese’s hiring demonstrates that BlackRock‘s intentions should be viewed more cynically. Effectively combating climate change will require nothing short of transforming BlackRock’s entire approach to its investment portfolio. Rather than hiring Deese to begin to implement those changes, however, BlackRock has put him in charge of a specialized, “green” corner of the business which accounts for just a fraction of total investments. Meanwhile, with Deese’s Sustainable Investing group as cover, it has continued to seek profits from the accelerated destruction of our planet’s ecosystems.
For the moment, it would seem that BlackRock’s greenwashing is aimed at softening critiques of its climate record from media and civil-society groups.
For the moment, it would seem that BlackRock’s greenwashing is aimed at softening critiques of its climate record from media and civil-society groups. In 2019, BlackRock has little to worry about from a climate change–denying administration which avoids scrutinizing corporations’ environmental records. However, with climate change set to be a key campaign issue in 2020 and a policy priority for any future Democratic administration, we should be very concerned about BlackRock’s operationalization of the revolving door. If Deese or the other members of BlackRock’s government-in-waiting join a Democratic administration in 2021, are they likely to turn around and threaten BlackRock’s business model? Will a new administration filled with people who view Deese as a friend be prone to take actions against BlackRock’s interests, be it with respect to the environment or terming BlackRock systemically significant and worthy of more stringent regulation?
With total assets under management greater than all but two countries’ annual GDPs, BlackRock’s actions are deeply consequential to the fight against climate change. It is already disturbing that a corporation of BlackRock’s size and influence faces so little democratic accountability. It is more disturbing that its greenwashing might allow it to escape what little accountability it might face in the future.
Using the public-service record of recent revolving-door hires as a shield against legitimate criticism or regulation is a cynical maneuver. As the next generation of climate activists seeks bolder and smarter actions to save the planet, one hopes they scrutinize presidential candidates’ likely personnel picks as well as their proposed legislation. One way to limit the impact and allure of greenwashing hiring is to make clear that once people become corporate adornments, they are no longer eligible to be hired by progressive administrations.
Jeff Hauser is the director of the Revolving Door Project, which aims to increase scrutiny on executive branch appointments, at the Center for Economic and Policy Research.
Eleanor Eagan is an intern with the Revolving Door Project.