Published on 21 April 2020

SUSTAINABLE FINANCE

Controversy mounts over Blackrock’s environmental and social advisory role for the European commission

The European Commission recently hired BlackRock, the world's largest asset manager, to help advise on environmental, social and governance standards concerning banks. This was a startling decision for the European NGO Finance Watch, which estimates that BlackRock is set to act as judge and jury in this operation. This concern was shared by over 80 MEPs of diverse political affiliations who collectively addressed the Commission in a written statement.

BlackRock wikicommons 01
BlackRock is the world’s largest asset manager.
@CC0

The European Commission recently entrusted BlackRock with implementing its action plan on sustainable finance. The American global investment management company, which manages more than $7 trillion in assets, won a call for tenders from the DG FISMA (Directorate General for Financial Stability, Financial Services and Capital Markets Union) to better integrate environmental, social and governance (ESG) risks into bank management.

According to the tender, BlackRock's research work must meet three objectives. First, it must study how to better integrate ESG risks into the risk management procedures of European banks. Second, it must determine how to integrate these risks into banking supervisions. Finally, it must determine how to integrate ESG criteria into banks' lending and investment decisions.

This is therefore a crucial mission for the European Commission, which wants to strengthen its sustainable finance strategy. The goal is to transform the banking model, both in terms of its internal operations and commercial activities, in order to make it more sustainable. It is precisely for this reason that the winner of this call for tender has sparked heated controversy.

A crucial mission

Finance Watch, which fights against abuses in the financial sector, was the first to speak out against the European Commission’s decision. The NGO is deeply concerned that BlackRock criticized the European Commission's sustainable finance policy, including the taxonomy for sustainable activities, as well as the corporate impact on climate change. "BlackRock is clearly judge and jury in this debate. Surely there is a way to reverse this decision," said Benoît Lallemand, Secretary General of Finance Watch.

MEPs are also alarmed by BlackRock’s new advisory role. In total, 85 MEPs from several different political groups (the centrists of Renew Europe, the Green Party, and the Social Democrats) addressed the Commission in a written statement: "Deciding to proceed with calls for tenders without taking into account political issues, the question of conflicts of interest, the necessary independence of consultants is a fault," said Pascal Durand, the Renew Europe MEP behind the initiative.

The European Commission has defended itself by saying that European tendering rules were respected. According to the Commission, the report submitted by BlackRock will only be one of several consultations performed in order to implement its action plan on sustainable finance.

Arnaud Dumas, @ADumas5


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