Clarice Feldman writes in THE PIPELINE
Imagine if you had billions of dollars of other peoples’ money at your disposal to invest and instead of investing it prudently to provide the maximum safest returns you can find, you decide to blow it to advance your own “environmental, social and governance”(ESG) objectives. Imagine that this virtue-signaling power trip at the expense of those to whom you owe a high degree of care, cost clients $1.7 trillion dollars in over a six-month period. Well, you don’t actually have to consider this a hypothetical, that is the story of BlackRock as I noted last month.
The question in my mind for the two years I have been warning about the loss to beneficiaries of such mismanagement is whether there will be any consequences for such conduct, and it looks as though there will be. Big time.
https://the-pipeline.org/another-bad-day-at-black-rock/
Clarice goes on to write about the coming backlash from various state attorney’s general.
Recently the state of West Virginia announced it would no longer do business with companies that boycott the fossil fuel industry—which includes BlackRock. The ban will “cost the firms $18 billion a year” according to West Virginia’s treasury office. That business loss is now potentially in the trillion-dollar range as 19 state attorneys general point to Fink’s record and assert the company he heads is “an explicit leader in the such to ‘retire fossil fuels’”. The letter to BlackRock Chairman Fink reads like a legal pleading with very extensive factual and legal citations. It begins :
https://the-pipeline.org/another-bad-day-at-black-rock/
Further in the letter.
The letter seeks a response by the 22nd of this month. The tenor of this well-documented letter and its extensive citations of fact and law lead me to believe, BlackRock will be forced to defend multiple lawsuits unless it takes significant steps to abandon both its ESG investment strategies and its extensive activities to force net-zero emissions at the expense of those whose money they manage.
https://the-pipeline.org/another-bad-day-at-black-rock/
Blackrock is in a heap of trouble. The law is very clear. Their only duty is as a fiduciary to their clients. They clearly violated that fiduciary duty. It’s not just the 1.7 trillion loss. It’s how it came about via ESG.
BTW Claris’s is a retired former top attorney who knows whereof she speakers.
I hope so. Larry Fink is a fink.
I’ve always wondered how much of the ardor for ESG investing is driven by fund managers’ actually believing in CAGW and/or other progressive nonsense versus just engaging in virtue signaling to impress the sweet young thing they just met in the Hamptons and/or to secure bragging rights for their 25 year-old trophy wives at the tennis club.
Wall Street will use any gimmick imaginable to separate fools from their money. ESG was the latest fad used by the marketeers to do that (along with bitcoin, SPACs and about 95% of the ETFs that have been flogged on the unsuspecting).
The general public should never think of anything connected to Wall Street as anything other than a sales/marketing/asset gathering operation.
In thirty years on the “buy side,” I ran across thousands of stockbrokers, analysts, “financial advisers,” “financial planners,” etc. Of those thousands, I only met three or four people I considered both honest AND competent. It’s an amazingly rare combination. The rest of them were either dimwits, used car salespeople or some combination thereof.
The “sell side” (i.e., brokers/investment bankers like Goldman, Morgan, Merrill, UBS, etc.) are hopelessly conflicted. Avoid them like the plague.
Vanguard is the only organization that is largely unconflicted. It is the only investment management operation that is owned by its customers. This unique structure eliminates most of the inherent conflicts of interest and allows Vanguard to compete on price. Since they are owned by their clients, Vanguard has every incentive to reduce and minimize fees and costs. Those fee and cost savings redound to the benefit of their client-owners.
Sadly, it seems that Vanguard has hopped on the DEI/ESG/SJW bandwagon also.
https://www.dailywire.com/news/diversity-training-at-vanguard-tells-white-men-to-accept-uncomfortable-criticism-floats-holding-them-accountable
Vanguard has a lot of goodwill from Jack Bogle’s championing of low-cost funds. But they seem intent on sacrificing it on the alter of political correctness.
Sad to say, but Vanguard’s also going woke of its own
volition. Woke Minneapolis is doing something
similar & already has a huge crime problem, to boot. Self-destruction, at its worst!
https://pjmedia.com/columns/chris-queen/2022/08/20/vanguards-diversity-training-seminar-targets-white-men-n1622619
https://justthenews.com/nation/states/center-square/report-minneapolis-teachers-union-contract-structures-layoffs-race
Powerline-
The crisis of crime in Minneapolis and beyond
Six months is being optimistic.
Vanguard management is allegedly engaging in the same practices as Blackrock.
Thank you.
I have both BlackRock and Vanguard ETFs in the same industry sectors.
I may as well sell the BlackRocks and get more Vanguards, diversifying further as I go.
That might not be diversifying as much as you think. Vanguard is reportedly the biggest shareholder of BlackRock, and also State Street, which is owned by BlackRock.
https://innotechtoday.com/blackrock-is-the-biggest-company-youve-never-heard-of/
BLRK’s progressive ESG virtue signalling is leavened by the pecuniary incentive to increase their average Mutual Fund management fees for curated, carefully selected, high cost, ESG funds stocked with highly speculative clean energy and other Social Justice investments compared to the competitive low percentage fees collected on index funds that match the S&P500, the NADAQ 100, the Dow 30 Industrials, and other equity indexes of value or growth stocks. The Low cost of Low Cost Index Funds available at BlackRock, Fidelity or Vanguard refers to the low fee structure of Index Funds which saves investors a significant amount of cash over time. This was investment principle upon which BlackRock and others built their businesses with corporate benefit 401K retirement accounts and IRA’s. Index funds offer diversification at reasonable management fees but the investment returns usually fail to match other investment strategies based on individual stock selection held over long term.
Nope you’re wrong. What is required, aside from all of the technical requirements that SEC imposes, is disclosure. If Blackrock tells the investor they are using objectives other than immediate financial gain for the securities they sell, and the investor agrees, then there is never any harm, or any foul.
This is nothing new or different. For hundreds of years investors have been buying government securities for purposes other than immediate financial gain … whether it is investing in Federal T-bills, or municipal bonds that carry low risk while also delivering low returns … or the patriot who buys war bonds to support the war effort.
The overriding responsibility as a fiduciary is to disclose, disclose, disclose. If that means disclosing a lower return as compensation for higher ESG objectives and the investor buys into it, no harm no foul. If Blackrock misrepresents what they’re recommending, say if they claim that the investor will get a higher return under ESG when Blackrock knows very well the return is likely to be lower, then that would be a violation of fiduciary duty.
Duane,
You’re wrong.
Fink and BlackRock have abused their immense proxy voting power to advance his and their personal and corporate climate agenda. This proxy voting power has been exercised across a multitude of funds with widely varied investment objectives (largely without the consent or knowledge of the fund investors).
Duane, let me double down on JG’s comment. ESG is ‘new’. Most of Blackrock’s clients aren’t. You might argue they didn’t pull their investment funds after ESG disclosure—but Blackrock NEVER said they might earn lower returns with ESG. Only that that was what they were now doing.
Rud, the issue of proxy voting by Blackrock is interesting. If they are using investors’ funds to push uneconomic policies on companies, do those companies’ shareholders have recourse?
And that’s why I’ve taken all my money out of Blackrock. Plenty of other good investment vehicles to chose among.
These are asset managers, not brokers. You are missing the point.
The Arrogance of Ignorance is strong with this one.
I think you are right, but they needn’t disclose lower returns. They could merely disclose short term risk and claim long term benefit. The basis of fiduciary is good faith. If they believe their policy is beneficial to investors, no matter how misguided, they are not acting in bad faith.
On the other hand, see the argument of mixed motives in part 3 of the letter, “Duty of Loyalty”
“The stated reasons
for your actions around promoting net zero, the Paris Agreement, or taking action on climate change
indicate rampant violations of this duty, otherwise known as acting with “mixed motives.” As one
commentator has put it: “Acting with mixed motives triggers an irrebuttable presumption of wrongdoing….”
https://www.texasattorneygeneral.gov/sites/default/files/images/executive-management/BlackRock%20Letter.pdf
And this:
“…it is not reasonable for a prudent fiduciary to assume that the Paris Agreement will be implemented within the United States, and by all of its signatories, on time and in full by 2050. ”
Part 4 of the letter.
In the early 1980’s the National Mineworkers Union (the Leader of the union Arthur Scargill) in the UK told their pension fund trustees to not invest in entities that competed with coal. This is a brief note of the case.”
“Cowan v Scargill (High Court) – 13 April 1984
This case is an important pensions case. It concerned a dispute over the investment of the assets of the Mineworkers’ Pension Scheme (the Scheme). As well as guidelines on the duties of trustees when investing assets, the case is useful for information on general trustee duties and conflicts on interest.”
The court made it clear that good prudent returns should be the only test of investment. I am a professional trustee (and a lawyer) and this was and remains good law and is generally followed. I have challenged our investment managers when they tout ‘green’ investments to show me that the investments have as good return as ‘ordinary’ investments realise. All I got was waffle but the manager was surprised at the pushback and maybe I made her think a little.
It makes sense now. I listened to him speak a few weeks ago and he sounded perfectly reasonable and grounded – so obviously he’s in trouble lol.
A number of Australian companies have been warned as well.
LdB,
Can you give more detail, either here or to my email?
Many thanks. Geoff S
Rud, I wonder if Blackrock’s only defense is to prove that ongoing and future global warming is now and will in the future harm its customers and that its investing decisions (Net Zero) would protect them from ongoing and future harm. It has been proven its easy to sway feckless politicians, CliSciFi profiteers, crony capitalists and the unwary public. How about an impartial judge and jury?
The issue with the legal (tort) system is the sheer complexity of the climate system and the solid, lock-step CAGW policies of the governmental bodies as supported by The Science. A tough nut to crack, but with trillions of dollars floating around it might be worth the effort to ambulance-chasing law firms. Just think asbestos, tobacco & etc.
‘…if Blackrock’s only defense is to prove that ongoing and future global warming is now and will in the future harm its customers and that its investing decisions (Net Zero) would protect them from ongoing and future harm.’
Unfortunately, they wouldn’t need to ‘prove’ anything other than the easily demonstrable fact that the Federal government effectively considers CAGW to be a done deal. Kinda like the court scene in ‘Miracle on 34th Street’, where Kris Kringle’s lawyer gets the old man off by producing a bunch of letters to demonstrate that the USPS, a ‘respected branch of the US government’, considered Mr. Kringle to be the ‘real and only’ Santa Claus.
They are too big to fail though. The ESG is not meant to make money, it’s ideological, they don’t care and they won’t be held accountable, even if they should, unless the powers that be decide to step back from the precipice. The world is teetering on the brink of collapsing into a technocratic authoritarian nightmare. Black Rock, and their ilk, are key players in this. I don’t hold out much hope that the course we are on now will change and saner heads will take the wheel. Buckle up, we’re in for hard times.
More (Karma) please !
The letter to BlackRock’s Larry Fink is a beautiful thing.
I hope Vanguard and Fidelity and T. Rowe Price and Grantham, Mayo von Otterloo (“GMO”) are paying attention.
Fink by name …….
And Chase.
ESG investing should be treated like embezzling to aid one’s church or political party. Any considerations other than the continued investment income of the clients is very highly suspect.
It’s about time someone stepped up to the ESG scam. I don’t see how they can get out of this predicament although I’m sure they’ll try.
Blackrock could end up having the world’s largest legal team before this is over.
And losing even more of their clients’ money defending the indefensible (perhaps they have good insurance)
As a rule, you cannot insure against illegal behavior.
Maybe it was an act of Gaia though
Only woke insurance companies would insure a woke firm like BlackRock and they would eventually lose their shareholders money the same as BlackRock is showing how to invest in virtue signalling to attract funds then lose lose their investors cash .
Excellent letter
Clear collusion
I’m not a lawyer, but my brother is. This is not very legalese language.
Sounds more like PR complaints.
A little of both. The letter states the basis for claims that could be made in a formal complaint, but it does so in understandable language. It’s pretty easy to convert these allegations into turgid text to place in numbered paragraphs in a complaint. Environmentalists do it all the time, so do politicians on both sides of the aisle.
Can’t wait ‘til it all hits the fan. 👍👍🤭🤗😀
ESG is a Communist idea. I don’t like anything related to Communism.
The top ten managers of Blackrock need to be fired and banned from ever working in the financial community for life. They should also be banned from working for or with any government agency. If they have trouble finding employment I’m sure Mike Rowe could help them out. These people disgust me.
If BlackRock carries on and makes no changes it will go belly up .
Another loss next year will signal to investors to pull their money out while there is time.
They would be terrified of another crash which will be bigger than the sub prime debacle .
For decades the large and “sophisticated” investment banks lost money for public pension funds and even their own individual clients by secretly betting against those investment mandates in the markets. Now they can move on to ESG for the same period of time or more, with bonuses of course.
What is to stop Biden (his puppeteer) and backers to try and put spoke in the wheel of those confronting BlackRock and their pals?
The US Constitution. Biden, et al, on the national level have no authority at all over what states and their AGs decide wrt state investments. The state governments have a great deal of autonomy when it comes to state matters.
The Constitution doesn’t seem to have bothered Biden so far, or in the past.
“Imagine if you had billions of dollars of other peoples’ money …. Imagine that (you) … cost clients $1.7 trillion dollars in over a six-month period.”
I simply can’t imagine investing billions and losing trillions. I can imagine having trillions and losing 20%.
I know enough billions can be trillions, but still ….
Apple alone, right now, has a market capitalization of $2T.
Fifty states, 40 billion each, is two trillion.
The California pension fund, alone, has a value of 440 billion. Every cent of it is invested somewhere. Hopefully, in BlackRock.
I think Felix and Jtom missed the point entirely…
that’s o.k., I’m not the best communicator.
(and I got two comments and a little dopamine boost.)
Better move on to new projects like like beach sewage dumps.
The US could fix this with a simple title disclosure. From “Blackrock” to “Blackrock, Not A Fiduciary.”
If there is a moral imperative, we should invest in anything to provide the third world with basic electricity, not to eliminate fossil fuels. Just read Robert Bryce “A Question of Power”.
Employing ESG or any other non-financial objective to an investment is not a violation of fiduciary duty as long as it is fully disclosed to the investor. If the investor believes that increasing the financial value of their investment is the sole objective, but that it’s not actually used by the fund manager, and was not so disclosed then there is liability.
After all, all investment funds including all mutual funds are assigned investment objectives which are not at all necessarily about “making more money”. People invest in Federal government T-bills or state or local government municipal bonds that are never big money makers – but it is always disclosed to the investors, and the reason they select such vehicles is because they are very low risk as compared to corporate stocks or corporate bonds.
Aside from all the technical rules that apply to investing and in selling investment vehicles, the overriding imperative to stay legal and to avoid litigation liabilities is disclosures. Disclose, disclose, disclose.
If an investor is OK accepting a lower return on investment in order to achieve some other objective, that is purely a personal decision. As long as everything that is under the control of the investment manager and of the organizations they’re investing in is fully disclosed.
Fink and BlackRock have abused their immense proxy voting power to advance his and their personal and corporate climate agenda.
This proxy voting power has been exercised across a multitude of funds with widely varied investment objectives (largely without the consent or knowledge of the fund investors).
The problem is Duane, it wasn’t disclosed to a lot of their clients.
In the end, a lot of Blackrock investment return goes to ‘non-clients’, which are retirement fund beneficiaries. And the Blackrock client does not have the ability to waive/change the desired investment outcome.
My guess is that the specific contracts cover investment strategy, and some how reference the the pension fund boilerplate.
So, there’s that too.
(& the duane appears as a straight shill that should always be ignored.)
Which is what Duane is pointing out. Assuming investors had ESG explained to them by Blackrock, then it’s the investors fault what happens to their money. Caveat Emptor.
Have those pension fund investors explained ESG to their pension contributors – the man in the street?
No, or I should say, I doubt it very much. In which case they are at least culpable for investing in a loss making initiative.
Can loss making causes be justified investment propositions?
Say Blackrock spent some money on Vet prosthetics or Vet housing charities. They will always remain cost’s however, the goodwill ’cause related marketing’ opportunities might attract more investors than conventional marketing could manage for the same cost.
I suspect ESG has been seen in the same light by Fink et al, rather than a personal ideological position, except they decided that it had to be imposed on businesses to be successful, which was their big mistake.
They wouldn’t impose Vet initiatives on their portfolio businesses, so what possessed them to imagine imposing ESG would ever be successful other than they badly misread the mood of the general public.
I suspect we are at ‘peak’ environmentalism. I’m not sure if it’s ‘peak, peak’ environmentalism but even the most stubbornly green layman is beginning to wake up to the fact all the worlds miseries right now boil down to one thing, the excesses of green politics.
Is this part of Klaus Schwab’s Great Reset? Could someone, or a group of someone’s, have designed the current world crisis and expect it to pan out in their favour?
pressuring companies to follow ESG most certainly IS a violation of Fiduciary duties … and that is what Blackrock has done …
Would it be if it could be shown to be profitable?
I think you have got that wrong Duane.
The fact is that the disclosures that the company sent to the investors was trash .
Fund managers can not invest in dodgy investments even if they are touted as environmental .
Fund managers have a legal duty to invest wisely and also taking into account the risk of profile of various investments .
Fund managers cannot plead that they have fully disclosed the risks of investing in green projects when experts in financial investing have warned to be very wary .
I am certain that they are the people in charge and if it can be proven that they have not done due diligence and risks have been overlooked or ignored the fund managers are liable .
They cannot hide behind a statement that they have released that they are going to invest in green projects when the basics never stood up from the start .
Pedant warning
state attorney’s general should be state attorneys general.
No apostrophe nrcessary, an apostrophe indicates possesion like the boy’s bicycle,
Known as the greengrocer’s apostrophe in the UK with things like a kilo of potato’s
Apologiesto those who don’t care
Nrcessary?
c’mon mike, where is your apology to those that don’t care (or don’t understand the humor jab?) 🙂
Pride comes before a fall…….
Perhaps the author was a grocer in a past incarnation?
(see “grocer’s apostrophes”)
and not only..but
you spelt potato correctly!!
we have companies here in Aus selling mangoEs and tomatoEs now..
facepalm
The English language is voraciously adaptive, predating on any other language to improve its ability to communicate.
The French, on the other hand, have a department devoted to protecting the French language.
OT a bit but kind of related: Will China’s Latest Energy Rationing Kill Biden’s Green Dreams? – PJ Media
From what little I know about the US legal system I understand the US is not short of resourceful plaintiff lawyers.
Why has it been left to state attorneys general to pursue this matter?
Cost- it’s prohibitively expensive to hire a team of lawyers for the years it
would take to win a case that could cover these out-of-pocket expenses.
Winning is not guaranteed. All of the state attorneys general who are doing
this are protecting state EEs pension plans as well as state consumers &
businesses.
Two big reasons the states are interested: First, hurting the oil and gas industry creates great economic pain to the state governments of oil and gas producing states. Royalties, corporate taxes, the income taxes of all the workers, and all the taxes generated by the multiplier effect are lost.
Secondly, states have state worker pension funds holding massive amounts of assets. A favorite investment for decades has been the companies of the oil and gas industry because they typically pay large, safe dividends. Harm the industry and you put those funds in jeopardy.
Who do you think the BlackRock investors were who lost that $1.7 T?
So the states are just telling BlackRock, if you kill our golden goose, we are going to sue you for diminishing our investment returns, and cook your goose by refusing to buy BlackRock investments.
I know Georgia Teachers Retirement Fund had some of their funds handled with Blackrock. Two years ago at the contract renewal we added language to retain our voting rights on invested funds and let them know that if they pulled any more BS their contract would be permanently terminated. I understand the rest of the state pensions are modeling that stance.
Just about every US teachers retirement fund, fire service fund and similar invest in Blackrock
Your evidence for this is?
ESG = Economic Suicide by Globalists.
I am very proud that these AG’s have recognized the danger these practices present. Dereliction of fiduciary duty is no laughing matter. Loss of assets under management causes losses to their own shareholders. Withdrawing those assets is a powerful weapon to prevent these companies from following their political whims using other peoples’ money.
One can hope…
The answer is simple… do not invest your lifesavings with the likes of Blackrock..
Every year I attend an AGM of an oil company where I am a T20. Every year, we have a representative greenie who owns a share or maybe two stand up and question the board on their ESG commitments etc… every year, the chairmen instead of telling the greenie where to go, gives a weak ineffectual response allowing the greenie to have a pseudo win and be back next year to continue pressuring the board. My conclusion is most board members are gutless.
next meeting put together two minutes of ripping the shit out of the green agenda & the useful idiots that support it, and hopefully karma will place you just in front of the greenie in the speaking order.
Blackrock has about 5 trillion dollars under management… it’s share of $18 billion isn’t going to bother it.
and clients do get a choice as to which funds to invest their assets in within their Blackrock portfolio
Something else griff knows eff all about.
Buzz off pest.
griff you are ignorant and would you would try to tell us black is white .
BlackRock did have 5 trillion dollars under management but they have just lost 1.7 trillion which even a dork like you should be able to subtract .
So now BlackRock have 3.3 Trillion dollars under management and griffy thinks thats OK .
blackrock is a real and present danger to many if not all
massive buyups of entire suburbs of homes, land and other social infrastructures give them massive sway and power. one company should NOT have such with zero controls to restrain them.
and i thought(still do ) amz goog n fkbk were bad news..
In the past, we put investment companies in a box labelled “risky” and the Reserve and other big banks as “solid and ethical”. Or something like that, depending on how badly you had been burner.
These days the boundaries between the mental boxes are fast disappearing.
Take Australia’s Reserve Bank, RBA. They have gone full mental on climate change. The worry starts if they advise policy makers and/or major investors that they need to do kind things to the environment for the benefit of the nation, of suffer pecuniary disadvantage. They seem not to be worried about the difficulties of getting correct projections from climate models, while the are heavily invested in predictive financial modelling. A prediction last year of low national interest rates for many years more has eluded this year as the RBA has enforced unexpected big interest rate hikes.
There are 4 or so Big Banks here, one of which is the old Commonwealth bank now CommBank. They have just released an extraordinarily alarmist climate change report of their own. It is not yet clear how they plan to convert their new religion into practical financial acts that affect their customers and shareholders. There used to be investment advice that banks paid low returns but were steady and hardly likely to fail.
Maybe it is a good time to clearly differentiate banks from investment houses in clear new terms. It would help if they stuck to their knitting and shut up about climate change and other diversions.
Geoff S
Very appropriate title for this story. Hopefully numerous state AG’s will kick some a.. on these low life’s like Spencer Tracy did.
I’ve had experience with Blackrock’s fund management. They lost a ton of my money this spring. Good thing I don’t have to count on it.
That’s attorneys general, it’s a plural not a general belonging to the attorney 😉