Quite what investment giant BlackRock is up to with all the focus it is putting on climate change is hard to make out. Having not (quite) given up all hope on human nature, I like to think that the company is being driven by a reassuring mixture of cynicism and greed, but there are moments when it just looks either naïve or deluded.

Financial Times:

BlackRock has been accused of double standards after it refused to back landmark environmental resolutions at two big Australian oil companies just months after the world’s largest asset manager warned global warming represented a risk to markets unlike any previous crisis.

The $6.5tn fund manager’s voting record at annual meetings has been closely scrutinised following chief executive Larry Fink’s letter to companies in January, where he announced BlackRock would put sustainability at the heart of its investment process and argued climate change could lead to a “fundamental reshaping of finance”.

But campaigners argued the asset manager was paying lip service to tackling climate change after it voted against resolutions calling for Woodside Energy and Santos to set targets in line with the Paris agreement, which aims to limit global temperature rises, and to disclose their lobbying.

Fink may be naïve or he may be a true believer, but one thing he will have to learn that certain strains of belief in a man-made climate catastrophe have a distinctly religious, distinctly millenarian, feel about them. And to followers of such faiths, the quest for moral purity never pauses. There is always another sin.

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After all, it’s not as if BlackRock had not been trying:

BlackRock said its votes were based on conversations with the oil companies and their responsiveness to investor concerns, and warned it could back similar resolutions next year if the businesses did not change. Outside the Australian votes, the asset manager said so far this year it had voted against 25 individual directors and two resolutions to discharge boards over environmental concerns, including at Finland’s Fortum and the US’s National Fuel Gas Company.

The FT‘s report is also interesting for providing another glimpse into the flourishing ecosystem that has developed under the push for “socially responsible” investing, a home for a rich variety of rent-seekers and scolds, many of which have a raison d’être based on a relentless insistence that companies meet a far from fixed set of environmental, social, and governance (ESG) standards.

Thus, there is reference to the “Australasian Centre for Corporate Responsibility, an advocacy organisation,” which has, I note from its website, “a small portfolio of shares that we hold for the purpose of engaging with companies, including through the filing of shareholder resolutions.” The same website reveals that is a member of “the UN Principles for Responsible Investment (UNPRI) and the Responsible Investment Association of Australasia (RIAA).”

The FT’s article also includes a reference to “Follow This, which has filed climate-target resolutions for the upcoming annual meetings at European oil companies.” Looking at the group’s website:

Follow This is a group of responsible shareholders in oil and gas companies. We support big oil to take leadership in the energy transition to a net-zero-emission energy system.

We therefore organise shareholder support for climate resolutions, calling oil companies for change and align its targets with the Paris Climate Agreement.

The use of shareholder votes to push this agenda is not without its ironies. Milton Friedman famously regarded the assertion of shareholder rights as a shield against “socially responsible” investing, something that he (rightly) regarded with suspicion. Now, however, the shield has been turned into a sword. I touched on all this in the course of a recent piece for NR.

As a shareholder, BlackRock has every right to insist that the managements of the companies in which it invests comply with its diktats. Equally, other shareholders are free to insist that BlackRock be told to take a hike, at which point the whole thing can be thrashed out at a general meeting. But many of the other shareholders will also be institutional investors. Even if they do not agree with BlackRock’s agenda, they may feel compelled by commercial pressures of the type that I have mentioned above to go along.

In effect, therefore, many companies — and not just those that are publicly listed — will be forced to change the way they do business as they try to keep up with ever-more-stringent rules set not by democratically elected legislators but by the unaccountable, the ambitious, the greedy, and the fanatical. Milton Friedman would have been appalled (if not altogether surprised) that activists such as these ESG vigilantes could exercise such a power through their ownership of shares. Today’s small investors, pensioners, and, for that matter, anyone else who depends on a robustly growing economy ought to be angrier still.

And finally, turning wearily back to that FT article for one last look at the ESG eco-sphere, we discover “the Institute for Energy Economics and Financial Analysis, a think-tank.”

Turning to its website, we read that “the Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.”

Of course it is.

(And for more on BlackRock’s approach to ESG investing, check out Rupert Darwall’s new piece up on the home page today).

An extract:

BlackRock, the world’s largest asset manager, is holding its annual general meeting this week. To help give itself a smooth ride, BlackRock’s leadership has struck a Faustian bargain with the environmental, social, and governance (ESG) activists on its share register. But a smoother ride for BlackRock may mean a rougher ride for many of the companies in which it invests. In coronavirus-speak, in order to acquire immunity for itself, BlackRock opted to become an ESG super-spreader.