BlackRock supports effort to take pensions beyond ESG

Stay informed with free updates

Simply sign up for the ESG investing myFT Digest — delivered straight to your inbox.

BlackRock has backed a coalition of US police and fire labor groups advocating for the retirement of pensions policy, in its latest effort to navigate the backlash against environmental, social and governance investing.

The world’s largest money manager is the only financial group among the founding members of the Alliance for Prosperity and a Secure Retirement, a Delaware-registered nonprofit that warns on its website that “politics has no place in Americans’ investment decisions.” After coming under fire for its advocacy of sustainable investing, Black stone has increasingly highlighted the primacy of investor choice.

A handful of small businesses and consumer nonprofits are also members of the alliance, which launched earlier this year amid a flurry of ESG-related activity. Forty-four state legislatures considered 162 bills in 2023, and 76 more were introduced this year, according to law firm Ropes & Gray. About 80 percent of the bills sought to ban the consideration of sustainability factors, while the rest actively promoted it.

“We are not pro-ESG. We are not anti-ESG. What we are is ‘for’ allowing investment professionals, who have a fiduciary duty to their beneficiaries, to do the work they are supposed to do,” Tim Hill, a retired Phoenix firefighter and president of the alliance, told the Financial Times . . “We are ‘anti’ politicians, right or left, interfering with this fiduciary duty so they can fulfill a political and social agenda.”

Hill said the group was set up to rally support from pension industry stakeholders. “We decided we would try to take a different approach by enlisting the industry to help us, particularly with the financial burden of stepping back and protecting our funds and fund managers,” he said.

BlackRock said in a statement that it was “proud” to support the alliance, adding: “As a fiduciary, our mission is to help more people experience financial well-being at every stage of life. The alliance is one of many BlackRock-supported organizations that are committed to helping more Americans retire with dignity on their own terms.”

The $10.5 trillion money manager has been at the center of the political fight over ESG since 2020, when Chief Executive Larry Fink beat the drum for sustainable investing, promising in his annual letter make “sustainability an integral part of portfolio construction and risk management . . . governments and the private sector must work together to pursue a transition that is just and equitable.”

BlackRock became a target both for Republican politicians who opposed what they described as “woke capitalism” and for progressives who wanted the company to go further in forcing invested companies to decarbonize.

Over the past three years, BlackRock management has become much more skeptical of climate-related shareholder proposals. Last year, he voted against most of them, saying the others were too prescriptive or not in his clients’ financial interests. At the same time, assets in the firm’s largest ESG fund have halved since the end of 2021.

BlackRock has overhauled its lobbying and public relations operations over the past year, and Fink has placed a much greater emphasis on pension policy and infrastructure investment. He used his 2024 letter to warn of a looming retirement crisis caused by changing pension and work patterns.

BlackRock’s website lists the Alliance for Prosperity as one of 13 organizations it is working with to encourage discussion of retirement issues. The group is supported primarily by public safety unions, which have a history of being more conservative on climate and social issues than some of their counterparts in the service industries. It also includes a federation of construction unions whose pension funds have $800 billion in assets, including the largest union for electricians in the U.S.

Recommended

The group has approached more liberal unions, including at least one large teachers union, but so far none have joined.

Hill said that for several years, labor groups and pensioners had become more concerned that politicians saw pension funds as “a pot of money that they could use to implement whatever their current political or social agendas were”.

“It is always labor that does the work, pays the political cost and pays the financial cost to defend [pension systems]typically without any help from the rest of the industry,” Hill said.

Source