NGO Study IDs Vanguard, BlackRock as Big Climate-Change Villains

Guess who the largest investors in climate-harming energy companies are? That would be major asset managers, with BlackRock and Vanguard Group the biggest offenders. So says an environmentalists’ report, “Investing in Climate Chaos.”

The report, spearheaded by Urgewald, a German environmental group, and conducted “in partnership” with more than 20 other nongovernmental organizations, comes down hard on two financial service stalwarts in particular: Vanguard, the mutual fund powerhouse, and BlackRock, the world’s largest asset manager.

Beyond those two, half of the stakes in fossil fuel companies identified in the report are held by just 23 investors. What’s more,18 of them are U.S.-based, the advocacy group stated, basing the report on data collected in January.

Most of the other managers and companies listed have relatively small positions in fossil fuel firms. Smaller players that the NGO named include State Street and Berkshire Hathaway, as well as fossil fuel companies themselves, such as Exxon Mobil; public utilities on the order of Duke Energy; and a few pension programs, notably Japan’s Government Pension Investment Fund.

By the report’s reckoning, Vanguard, managing $269 billion in fossil fuel investments, and BlackRock, at $263 billion, account for 17% of all investments in fossil fuel that Urgewald counts.

“If it is bad for the environment, it is bad for retirement,” the report quoted Doug Norlen, from Friends of the Earth U.S., commenting. “Vanguard’s retirement schemes are built on investments that jeopardize our future.”

Vanguard’s largest fossil fuel holding is $4 0billion in Exxon, its disclosures show. The report blasted the oil giant as having “done more than any other to obstruct the adoption of effective climate policies.”

BlackRock has positions in oil and gas companies that account for two-thirds of the world’s yearly hydrocarbon production, per Urgewald. Its single largest energy holding is also Exxon, which is the firm’s ninth biggest equity position overall. . Although the asset manager has a policy against investing in any business that gets at least one-quarter of its revenue from coal, the report charged that BlackRock exempts power companies that use coal. “As a result, BlackRock remains the world’s largest investor in coal developers,” it said.

This green-minded broadside illustrates a dilemma for these asset managers, many of which have taken supportive stances to combat climate change. BlackRock, in particular, is under fire from numerous Republican state officials that condemn its backing of environmental, social and governance precepts. Some GOP pols accuse the firm of “boycotting” fossil fuel producers. Neither Vanguard nor BlackRock could be reached for comment.

In the past, BlackRock has responded to critics on the right and the left by saying that, while it supports ESG, is not about to “dictate how clients should invest.” In a statement, it declared that “transition to a low carbon is in the interest of realizing the best long-term financial results for our clients.”

Vanguard, also under GOP attack, has made much the same argument. It did raise environmentalists’ ire last year when it quit the investment-industry initiative on combating climate change, saying it wanted to “speak independently on matters of importance to our investors.” Some contended that Vanguard was just knuckling under to politicians’ pressure.