Concerns Raised Over BlackRock Advising EU on Environmental Rules for Banks

The EU has hired one of the largest global investors in banks and fossil fuel companies to help create new environmental regulations for banks.

The EU’s executive arm, the European Commission, announced this week that BlackRock had outbid eight other bidders on a new contract for a new study. The study will explore how the EU could include environmental, social, and governance (ESG) factors into its controls for the banking sector.

Blackrock’s Financial Markets Advisory (FMA) arm will be paid £483,000 by the commission for the study.

However, BlackRock’s potential conflict of interest has been highlighted by campaigners. The investment management company has significant financial interests in sectors that will be affected by the new rules.

BlackRock is the largest investment management company in the world, with £5.97tn in assets under management on 31 December. The company indirectly holds large stakes in many of the biggest companies worldwide, as many of the products it holds track bond indices and equity.

The company is within the top three investors in the world’s eight largest oil companies, and within the top ten investors in twelve of the leading Global Systemically Important Banks (G-SIBs).

Climate and energy campaigner at Urgewald, Katrin Ganswindt, said: “Appointing BlackRock as advisor to the European commission on environmental, social and governance factors seems a bit like letting the fox guard the henhouse. On top of being the world’s largest investor in fossil fuels, they are also among the leading global financiers of the weapons industry.

“We are baffled as to why the European commission didn’t think there would be a massive conflict of interest with this choice”.

The decisions that the European banking regulators make could have a serious effect on the finances of the companies that BlackRock holds shares in. As an example, loosening the restrictions on lending to companies contributing to the climate emergency could be beneficial to both lenders and oil companies.

A spokesperson for the European commission said that the contract was given “in full and strict compliance with the applicable EU procurement rules, including those on the eligibility of tenderers and the prevention of any potential conflict of interest”.

The spokesperson also added that the study that BlackRock carries out will only be one aspect in the EU’s policy-making process.

A BlackRock spokesperson said that its FMA arm operates independently of its investment management: “We are honoured that BlackRock Financial Markets Advisory has been selected to perform an analysis to inform the European commission’s action plan on sustainable finance, deploying our expertise and capabilities in advising public-sector clients on structural trends, including the transition to a low-carbon future”.