Republicans Are Blasting BlackRock's ESG Agenda — Scandal Explained

BlackRock Inc., the largest global asset manager, has been criticized by both climate activists and fossil-fuel proponents. Has BlackRock been involved in an ESG scandal?

By Kathryn Underwood

Oct. 19 2022, Published 11:39 a.m. ET

Recently, BlackRock Inc., the largest asset manager in the world, has faced criticism by Republican legislators for pushing ESG investing over other energy investments.

Environmental, Social, and Governance (ESG) investing has grown more popular in recent years as these types of issues have been brought to the public’s attention.

However, the firm has refused to quit fossil fuel investments, which puts it in a difficult position.

The SEC’s proposed ESG regulations could help protect investors, but an ESG scandal has emerged as regulators and activists claim funds like BlackRock are misleading investors and shareholders over ESG credentials.

So, what does this all mean? Keep reading for everything you need to know.

First, what is ESG investing?

ESG investing refers to three categories: environmental, social, and governance.

Many investors today are focusing on investments that align with their values. This may also be called “socially responsible investing,” “sustainable investing,” or “impact investing,” though these each have different emphases.

Environmental: Investors focus on companies that care for the environment. They may qualify through their funding of green energy projects, natural resource conservation, treatment of animals, and management of waste and pollution.

Social: Issues such as diversity, inclusion, and social justice are given high priority by these companies.

Governance: This aspect of ESG investing refers to how a company handles its leadership. Transparency in accounting, choice of board members, and avoiding illegal conduct are important.

Despite ESG agenda, BlackRock refused to stop investing in fossil fuels.

In a move that angers climate activists, BlackRock, whose current CEO is Larry Fink, told a British committee that it won't stop investing in fuels like coal, oil, and gas.

“BlackRock's role in the transition is as a fiduciary to our clients — it is not to engineer a specific decarbonization outcome in the real economy,” the company said.