BlackRock chair Larry Fink. The asset manager retreated from voting on climate change after lawsuits brought by Republican attorneys-general
I am pleased to see that Dutch pension funds are no longer putting their money with BlackRock now it’s retreated from voting on climate change. Well done Mary McDougall & Co for bringing our attention to it.`
The PME group, which manages €59bn of retirement savings for workers in the metal and technology sectors, said it had “decided to end our relationship with BlackRock” following a months-long review.
There are two views of money at work here. Firstly there is the deal between the scheme managers which may be commercial and then there is the deal done for the members, which is fiduciary and social. The PME group has to be both commercial and social and that means standing behind the principles it has established.
BlackRock have changed their position on voting to align it with American political consensus and the consequence for the Dutch fund manager is to terminate its relationship.
We have had one such example that springs to mind (though there may be other decisions of the same kind taken by pension trustees in conjunction with their advisers). The FT reminds us
In February, the UK-based The People’s Pension pulled £28bn from State Street, saying it was prioritising “sustainability, active stewardship and long-term value creation”.
I have not forgotten. My estimation of People’s Pension went up in February when they announced this and it goes up every time I read such news.
We should be particularly pleased to see American Pension Funds voting off American fund managers who do not comply with instructions.
In late November, New York City’s top finance official Brad Lander recommended that three of the city’s biggest pension funds drop BlackRock as a manager of more than $42bn, as the metropolis looks to use its weight in markets to tackle climate change.
Lander, who will step down as city comptroller at the end of the year, said BlackRock and two other asset managers, Fidelity and PanAgora, had failed “to address climate risk with the seriousness we expect”.
New York has recently made its position on American political behaviour quite clear. Now I read of a top official determining that New York’s City Pension funds should not tolerate capitulation to political interference.
It is not woke to have principles about climate risk and stick to them and I hope that those of us strong minded about this in the UK or Europe, will recognise and support those in America who do not give in to the commercial advantage that can be gained by dong what Government considers commercially to the gain of it and the country.
It cannot be commercially for a country or a Government to see the climate continue to deteriorate. Canada, with a form BOE head Mark Carney at the helm, will have none of that.
Thanks FT for publishing this and laying out the facts in such a way that we can have no doubt how you feel on this.
I wouldn’t give my pension to Americans who don’t care about the climate. I wouldn’t and I won’t and I will pay to remove my money from LGIM if it moves from the mandates I chose for my personal investments. I don’t suppose I will have to, knowing Legal & General. There are of course alternatives if they did!
“New York has recently made its position on American political behaviour quite clear. Now I read of a top official determining that New York’s City Pension funds should not tolerate capitulation to political interference.”
For Americans, ESG mandates are political interference! An investment fiduciary for plans subject to ERISA (the vast majority of plans in America) must execute their duties “solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently and must diversify the plan’s investments in order to minimize the risk of large losses.”
Fifty years ago, Americans decided that social investing of pension assets was inconsistent with ERISA’s duties. Back then, we had plans where the trustees wanted to invest in businesses that favored union membership. In my MBA program, back in the fall of 1978, I asked my Labor Markets prof “will social investing of pension assets become an issue?” He responded curtly: “No”. Pregnant pause. I bit. “Why not?” He responded: “Because the amounts at issue are not significant.”
Today, that’s a meager $50 Trillion (USD) or so.
Similarly, up until ENRON, too many plans had outsized commitments to employer securities as plan investments (common stock of the plan sponsor or of a participating employer).
The test on investments is simple – as a plan investment fiduciary, you should be able to clearly document and justify your selections, and that proof should evidence both procedural and substantive compliance with ERISA fiduciary duties.
How can you accomplish that duty with a sleeve that favors investments simply because they meet YOUR Environmental Social and Governance criteria – whatever criteria YOU have adopted? Those criteria will never meet the ESG criteria (or lack thereof) of all of the plan participants in whose SOLE interest you are supposed to perform your duties. In fact, YOUR ESG criteria may be in conflict with those of the plan participants.
So, investment performance relative to risk is the only safe, defensible option for fulfilling your fiduciary duties. And, for participants who share YOUR ESG criteria, ensure that, for investments that participants control, that they have the option of Self Directed Brokerage with access to the favored investments.
What America needs from the Dutch is a long term contract to leverage their wisdom and engineering expertise in combating rising sea levels – should that outcome occur. America (and Americans) need to invest there. We don’t need the Dutch to invest here.
Keep in mind that unlike most plans in America, New York City Pension funds ARE NOT subject to ERISA’s fiduciary duties. Those duties have been described as”the
highest duty known to the law.” Public employees, and participants in church plans, plans that are not subject to ERISA, do not have that protection.