Economy

BlackRock Seeks to Defends Its Reputation Over E.S.G. Fight

What E.S.G. really means

BlackRock wants to clear the air on “woke” investing.

Yesterday, the world’s largest money manager published a letter pushing back on one it received last month from 19 Republican state attorneys general who accused BlackRock of putting its “climate agenda” ahead of clients, collaborating with climate activists and boycotting energy companies. Tensions between BlackRock and Texas in particular came to a head last month when the state accused BlackRock of boycotting energy companies, violating a 2021 law that aims to protect the energy industry from the growing popularity of climate-minded investing. As a result, BlackRock could be blackballed from managing the billions in retirement funds of Texas government employees.

BlackRock says it’s looking to correct “misconceptions” and “inaccurate statements” about its climate position. In its letter, BlackRock says that the firm has never dictated specific emission targets to any company, and that it doesn’t coordinate its investment decisions or shareholder votes with others on climate issues, as the attorneys general claimed. Far from boycotting, BlackRock says it has invested “hundreds of billions of dollars” in energy companies.

The firm is following a broad trend of policymakers and research when it comes to climate issues, BlackRock says.“Your letter makes several inaccurate statements about BlackRock’s motive for participating in various ESG-related initiatives,” BlackRock writes in the letter, which is signed by the firm’s head of external affairs, Dalia Blass. (E.S.G., or environmental, social and governance, is the latest term for socially conscious investing.) Instead, BlackRock says its shareholder votes and investment decisions reflect that, generally, its investment professionals believe that climate change poses real risks and opportunities for investors. The firm’s belief is “by no means unique,” BlackRock writes.

BlackRock’s tussle with state officials comes at a time when corporate social policies are becoming a campaign issue. Republican legislators in Texas and elsewhere have looked to punish companies that try to reduce the sales of guns, or help their employees gain access to abortions. At the urging of Gov. Ron DeSantis, Republican of Florida, an oversight board voted to ban the consideration of “social, political or ideological interests” when making investment decisions about the state’s pension fund.

Yet fund managers in many red states appear to be backing E.S.G. measures anyway. A recent study from the fund research firm Morningstar found that pension funds in those states had an average support rate of 80 percent for shareholders’ proposals that encourage companies to consider environmental, social and governance issues as well as their bottom lines. For instance, this year, Texas’ Employees Retirement System, the state’s second-largest public pension fund, voted for shareholder proposals that urged big banks to cut off lending to fossil fuel companies.

“Do a lot of red states have the same problem that they point out is an issue among large E.S.G.-promoting asset managers in their own backyards?” Vivek Ramaswamy, the author of “Woke, Inc.”, asks DealBook. “The answer is yes.” He recently started his own fund firm, Strive, which promises to prioritize profit considerations in its investment decisions.

HERE’S WHAT’S HAPPENING

A top Fed official signals more rate hikes are coming. Lael Brainard, the central bank’s vice chair, said the Fed would need to see “several months” of low monthly inflation data before it was convinced that inflation was cooling off. That fortified expectations that the Fed will raise rates by three-quarters of a percentage point this month.

President Biden reportedly delays a decision on China tariffs. The White House is holding back on scrapping Trump-era levies on Chinese imports, Bloomberg reports. While the administration is still considering ways to offer American businesses relief, political considerations are playing a role in the delay.

New research backs Twitter’s claim on bots. The social network’s assertion that less than 5 percent of its monetizable users are spam accounts is reasonable, according to new findings by the data analytics provider Similarweb. That 5 percent figure has been questioned by both Elon Musk, who cites it as a reason to call off his Twitter takeover bid, and Bob Iger, a former C.E.O. of Disney, who weighed buying Twitter.

Europe’s Shift Away From Fossil Fuels

The European Union has begun a transition to greener forms of energy. But financial and geopolitical considerations could complicate the efforts.

  • Racing to Avert a Crisis: As Russia tightens its chokehold on supplies of natural gas, Europe’s long-term switch to more renewable sources has been lost to a short-term scramble to stave off an energy crisis.
  • Nuclear Plants: Germany will keep two of its last nuclear power plants operational to cushion the blow of a deepening energy crisis tied to the war in Ukraine. The decision will delay the country’s plans to become the first industrial power to go nuclear-free for its energy.
  • Up in Arms: A decision by the Dutch government to set goals of cutting nitrogen emissions in half by 2030, has caused an uproar among dairy farmers, who believe the plan unfairly targets them.
  • A Controversy: The E.U. voted in favor of labeling some nuclear power and natural gas plants as sustainable investments. Critics say it’s “greenwashing.”

Apple reaches for the fitness wearables market. At a product event yesterday, the tech giant introduced an $800 version of its Apple Watch aimed at endurance athletes, a bid to snatch market share from rivals like Garmin. Apple also revealed its latest iPhone and updated AirPod models.

Europe’s energy reprieve looks tenuous

Natural gas prices in Europe have plummeted more than 40 percent over the past 10 days, welcome news for businesses, homeowners and policymakers from London to Berlin.

This morning, the futures contract for Dutch T.T.F. natural gas traded below 200 euros per megawatt hour, after soaring to a record of nearly 350 euros per megawatt hour last month as uncertainties over the flow of Russian gas to Europe jolted the markets.

Credit…The New York Times

Don’t bank on this benign price trend continuing. “A key reason behind the recent price volatility is that traders just don’t know what to make of this market,” Fabian Skarboe Ronningen, a senior analyst at Rystad Energy, told DealBook.

Traders are watching for whether the European Commission will intervene in the energy markets, in an effort to limit price rises. Until details emerge on what that would look like — E.U. ministers will hold a meeting on that tomorrow — trading could be subdued, he said.

Also allaying trader worries are Europe’s success in finding alternatives to Russian gas and rising gas storage rates on the continent. Germany is ahead of schedule in filling up its natural storage facilities to nearly 86 percent, according to Rystad. Italy is at 84 percent, and France is at 93.5 percent.

All that bodes well for the early winter months, but it doesn’t mean Europe is out of the woods. “Europe may not need to rely on Russia to get through this winter,” Ronningen said. “But in March, next year? If they are down to 10 to 20 percent storage levels, that will make things difficult to get through the spring.”


The next shock to supply chains

The world is still grappling with the turmoil that the coronavirus pandemic dealt to global supply chains, which snarled the production of huge sections of goods including automobiles and iPhones. But experts warn that delicate industrial networks are at risk from another major threat, The Times’s Ana Swanson and Keith Bradsher report: climate change.

“What we just went through with Covid is a window to what climate could do,” said Kyle Meng, an associate professor at the University of California, Santa Barbara. Extreme weather events around the world are becoming more frequent, causing an array of knock-on effects, including component shortages and shipping delays.

Consider a record drought in southwestern China: It reduced the amount of available hydropower, leading to power cuts at regional factories, including those for Foxconn and Toyota. Vegetables in the area wilted from heat, driving up meat prices.

Finding solutions and alternatives isn’t easy. Building factories elsewhere could be costly for both companies and consumers. And competition for food production could lead to more export controls that reduce global agriculture flows, a fear that prompted the World Trade Organization to warn against countries imposing protectionist policies.

To many economists, trade can help solve climate-related problems — but also aggravate them. “We are so interconnected from our supply chains that events on one side of the world can dramatically impact people’s well-being elsewhere,” Solomon Hsiang, a professor of public policy at the University of California, Berkeley, told The Times.


“There is a limit to the economics you can pay and have a business that can be profitable.”

— Andy Jassy, Amazon’s C.E.O., pushing back against demands by some of the retailer’s workers that starting salaries be raised to $25 an hour. At the Code Conference, Jassy also criticized a recent unionization vote at a Staten Island warehouse.


Wall Street takes on TikTok

Wall Street firms have long believed in the need to portray and protect a strong and consistent image, and that aim generally extends to their social media policies. But those strict guidelines are running up against two forces: a tight labor market and a talent pool of potential recruits full of social media natives who want the ability to freely express themselves.

That’s caused the media-shy Wall Street firms to jump into creating their own social media content, rather than fight their junior associates’ propensity to post. Are they winning? Not yet.

BlackRock joined TikTok this year, and Goldman Sachs is reportedly planning to follow. Why TikTok? Because that’s where the potential hires are. BlackRock has about 15,000 followers on TikTok. Its videos tend to be more about financial education and less about giving a picture of what it’s like to work at the firm. The videos feature a young and diverse crowd. Jackie Nov, BlackRock’s global head of social media, told DealBook that BlackRock featured “employees from all over the firm” and that its engagement on TikTok was geared toward promoting “financial well-being.” That said, BlackRock has yet to produce a huge hit online.

But can Wall Street firms, known to prize privacy and secrecy, also do authentic? Jeffrey Younger, an associate professor of management communication at N.Y.U. Stern, isn’t so sure. “Effective business strategies require communication that becomes more predictive or proactive, looking to ultimately build interactive relationships with stakeholders,” he told DealBook, meaning, at some point, if done right, the brand becomes a part of consumers’ everyday life.

For now, the finance industry’s most junior employees are the ones who are winning on TikTok. Social media posts showing what it’s like to work as an entry-level analyst remain extremely popular. One TikTok user, Naeche Vincent, 24, shares her experience working 19-hour days and tips on how to make a good impression in the industry. Some of her videos get millions of likes.

THE SPEED READ

Deals

  • Cineworld, the movie theater chain, filed for bankruptcy in a bid to reduce its $8.9 billion debt load. (NYT)

  • The digital publisher Vice is weighing a content partnership with MBC, a media company backed by Saudi Arabia, years after distancing itself from the kingdom. (NYT)

  • Shareholders of Richemont, the luxury brands conglomerate, rejected a proposal by the activist investor Bluebell Capital. (Bloomberg)

  • Kim Kardashian is adding “private equity firm founder” to her résumé. (WSJ)

Policy

  • A Texas judge ruled that parts of the Affordable Care Act centered on preventive care were unconstitutional; the Biden administration is expected to appeal. (NYT)

  • The White House suggested that any effort by Britain to alter post-Brexit trade policies with Northern Ireland could hurt efforts to reach a U.S.-Britain trade deal. (Bloomberg)

  • Peloton may be fined by federal regulators over how it handled the recall of a treadmill model. (New York Post)

Best of the rest

  • Executives of Bed Bath & Beyond were reportedly worried about, Gustavo Arnal, then the retailer’s C.F.O., in the weeks before he died by suicide. (WSJ)

  • When Amazon Prime two-day shipping takes, well, longer than two days. (Recode)

  • “Streaming TV is having an existential crisis, and viewers can tell.” (WaPo)

  • The reported buyer of a nearly $107 million mansion in Miami: Citadel’s Ken Griffin. (WSJ)

Thanks for reading! We’ll see you tomorrow.

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