Notwithstanding fundamental questions such as the negative impact that this will have on the credibility of the European Commission’s Sustainable Finance strategy and its ambitious consultation published the very same day, there is an obvious conflict of interest for the largest asset manager in the world to make recommendations on the prudential treatment of banking institutions that are part of its investment universe.
Furthermore, Finance Watch denounces the technical incoherence of this decision. The two main issues at stake are the use of the EU Taxonomy regulation as the cornerstone of the EU sustainable finance agenda, and the materiality approach to reporting climate-related information:
- About the Taxonomy regulation: BlackRock is one of the harshest critics of the EU approach to sustainable finance, and in particular of its cornerstone Taxonomy regulation. What is the coherence of having one of the biggest critics of the pillar of the EU approach to sustainable finance (Taxonomy) advise the same European Commission on the integration of ESG factors into banking regulation, in other words on an essential piece of its sustainable finance agenda?
- About the materiality approach to reporting climate-related information: BlackRock defends a so-called “single-materiality” approach to climate change, meaning that it is interested only in the financial impact that climate change will have on companies accounts (“outside-in”) as opposed to the European Commission’s “double-materiality” approach that considers essential to look both at the financial impact that climate change will have on companies accounts and at the impact that companies will have on the environment and on climate change (“inside-out”). This debate is not only technical: it will drive the ability of finance to make a difference, or not, on climate change. In a clear allusion to Larry Fink’s letter to CEOs dated 18 January, Executive Vice President Valdis Dombrovskis announced on 28 January 2020 that he would invite the European Financial Reporting Group (EFRAG) to develop European non-financial reporting standards, i.e. standards founded on a “double-materiality” logic. What is the coherence of asking the biggest supporter of a “single-materiality” approach clearly incompatible with the European “double-materiality” approach to advise the European Commission on an essential piece of its sustainable finance regulation?
Benoît Lallemand, Secretary General of Finance Watch, said:
“We are concerned that the ambitious leadership on sustainable finance by the European Commission could be damaged by this ill-timed and ill-considered appointment of BlackRock as an adviser on the integration of ESG factors into banking regulation. BlackRock is clearly judge and jury on this issue. Surely there must be a path to cancelling this decision.”
Thierry Philipponnat, Head of Research and Advocacy of Finance Watch, said:
“BlackRock’s mandate to advise the European Commission on the integration of ESG factors into the EU banking prudential framework is not just politically self-defeating: given BlackRock’s opposition to the most fundamental pillars of the EU sustainable finance agenda (“Taxonomy” and “Non-financial reporting”), it is a mistake as it could lead to an EU banking prudential framework in contradiction with other pieces of its sustainable finance regulation”.
For further information or interview requests, please contact: Pablo Grandjean, Communications Officer at Finance Watch; firstname.lastname@example.org or at + 32 474 47 07 47.
ABOUT FINANCE WATCH
Finance Watch is a European, not-for-profit association of civil society Members, dedicated to making finance work for the good of society. It works for a financial system that allocates capital to productive use through fair and open markets, in a transparent and sustainable manner, in line with society’s needs and without exploiting or endangering society at large.
Finance Watch Members are supported by a professional full-time secretariat recruited mainly from the financial and policy sectors, with strong communications and stakeholder engagement capacities, to conduct advocacy and provide technical know-how and coordination for our civil society network.
For more information about the Finance Watch governance and funding, please visit the Finance Watch website: https://www.finance-watch.org/governance-funding/
 See, for instance, the letter to CEOs sent by Larry Fink on 18 January 2020 or Towards a common language for sustainable investing