The European Green Deal is a set of initiatives brought forward by the European Commission with the stated aim of making Europe Carbon neutral by 2050, similar in many ways to the US’s Green New Deal. However, on April 8th the European Commission announced it was appointing BlackRock, an investment and wealth management company which is the world’s largest investor in fossil fuels, as an advisor in delivering the European Green Deal. In this article, a PBP Cork branch member discusses the background to the deal and explores how little meaningful impact it will have in tackling climate change.
Background to the European Green Deal
The European Commission unveiled its European Green Deal on October 11th 2019 aimed at making Europe carbon neutral by 2050. The Commission announced it would press ahead with its plans on December 11th, 2019. With typical EU fanfare, the president of the European Commission, Ursula von der Leyen, stated that the Green Deal would be Europe’s “man on the Moon moment” and vowed to “leave no-one behind” in reaching its targets.
The European Parliament voted to support the deal on 15 January 2020, with requests from the Parliament that the EU show even greater ambition. However, as details emerged of the green deal’s scope, it was met by widespread dismay from environmental campaigners with Greta Thunberg’s Fridays for Future, Greenpeace EU and the Climate Action Network all denouncing the plan. Greta Thunberg slammed the deal, declaring “You are giving up”.
On April 8th, 2020 it was announced that the European Commission had appointed BlackRock as an advisor in formulating its Green Deal and awarded it a contract to draft a key piece of infrastructure for the Green Deal. By involving BlackRock, it has become abundantly clear that the EU intends to go no further than engaging in an enormous greenwashing exercise, not even managing one small step to protect our endangered environment.
Greenwashing is a form of marketing spin in which green PR (green values) and green marketing are deceptively used to persuade the public that an organization’s products, aims and policies are environmentally friendly (source: Wikipedia).
Who are BlackRock?
Before we go into any details about how the EU effectively spiked any attempts to constrain industry and protect our shared environment, we should first have a quick look at BlackRock. The corporation is the biggest investment management company across the globe, with more than $7.4 trillion in assets at the end of 2019. BlackRock’s market capitalization is more than $84 billion (jargon: if you wanted to buy all the companies shares, it would cost you $84b). The corporation is, deliberately and misleadingly, also known as Blackstone and will be known to many Irish students as it sponsors Launchpads in NUI Galway, University College Cork and Trinity College, Dublin through its “philanthropy” efforts.
BlackRock has a long history of lobbying against any climate progressive legislation considered by governments and the EU. It has opposed over 80% of climate-related shareholder motions of fossil fuel companies between 2015 and 2019. Incidentally, BlackRock is the largest investor in weapon manufacturers through its iShares U.S. Aerospace and Defense ETF.
What are BlackRock’s environmental credentials?
In September 2018 a bunch of environmental groups including Friends of the Earth, the Sierra Club and Amazon Watch got together and launched a campaign called “BlackRock’s Big Problem”, detailing how BlackRock is the “biggest driver of climate destruction on the planet” . The campaign has highlighted that BlackRock is the biggest or one of the biggest investors in:
- Fossil fuel companies.
- New coal plant development and existing coal reserves worldwide.
- Oil and gas companies.
- Rainforest destruction, including in the Amazon and Indonesian rainforests.
- Pipelines, palm oil plantations, tar sands and coal mines.
BlackRock likes to claim that it is simply an investor in these companies, that its ownership doesn’t count, and that it has no responsibility for the companies it invests in. However, this claim does not even come close to stacking up, as BlackRock has voted against 46 of 52 environmentally progressive motions at shareholder meetings. It refuses to divest itself from companies that are worsening climate by their activities. What, you might ask, are a company like BlackRock doing at the centre of Europe’s most important climate initiative, our “man on the Moon moment”? A very good question.
What is BlackRock’s role in the Green Deal?
Let’s get the jargon bit out of the way first. The European Commission announced that “BlackRock will develop tools and mechanisms for integrating ESG into banking regulation”.
ESG is an acronym for environmental, social and governance and is used by investors to evaluate corporate behaviour and to determine the future financial performance of companies. An ESG taxonomy, like many areas of corporate finance, is a complex instrument but one we have explained in the next few paragraphs in, hopefully, less complex language.
Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that investors can use to rank or grade potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. (For more detail, check out What Are Environmental, Social, and Governance (ESG) Criteria?)
An ESG taxonomy is simply a set of rules applied to these environmental, social and governance (ESG) criteria and results in a score or ranking given for a particular company and/or project. For example, an Airline is likely to score poorly on environmental criteria given its dependency on fossil fuels and may also score poorly on social criteria if one or more of its suppliers is also heavily dependent on fossil fuels.
Understanding the difference in a public vs private ESG taxonomy is important. The European Commission has developed its own public ESG taxonomy, with the stated purpose of ending greenwashing that inevitably happens via a private ESG taxonomy. The EU public taxonomy was completed just recently, on 9th March 2020, and anyone can download the completed final report from the EU website and download the taxonomy tools in Excel format here.
In contrast, a private ESG taxonomy is, as you might expect, private. Therefore, a private ESG rating cannot be examined in any detail – in other words, you can get the ESG rating you pay for. In the Green Deal proposal, future projects have no mandatory enforcement to use the now completed EU taxonomy, an ESG “rating” can be acquired via a public or private ESG. Inevitably, the decision to allow this choice is going to lead to even more greenwashing and not less as was the stated intent from the EU. Unsurprisingly, BlackRock are the world leader in greenwashing!
Worse still, under the Green Deal, companies can now avail of EU subsidies or bonds for ‘green’ finance (for more, see “ESG – a complete fraud”, a 2-minute YouTube interview with Chamath Palihapitiya). A very real danger has now been created where public money the European Commission had promised to put into greening the European economy will now be used to merely subsidise greenwashing.
The appointment of BlackRock will result in an enormous waste of public money as the EU’s own existing public taxonomy will be side-lined. Why was a replacement required at all and even If a replacement was required, there are a number of recognised experts in the ESG area – both academic and commercial – who would have been more than capable of undertaking the task. It is mind-boggling that the European Commission is now handing the keys to the green finance regulatory kingdom to BlackRock, a renowned greenwasher, and paying it €280k for “developing tools and mechanisms for integrating ESG into banking regulation. That the EU would trust BlackRock to set aside the interests of its clients whose wealth they manage is simply not credible.
The timing of all this is interesting. The agreement was reached in to a European Commissioners remote meeting on April 8th at a time when everyone’s attention is understandably diverted to a global pandemic. Of equal interest is that the decision was made at European Commission level and not re-presented to the EU Parliament for consideration. Many EU Parliamentarians have taken to social and mainstream media to vent their anger at the appointment of BlackRock and the role BlackRock has been granted. They have also expressed their disgust at the undemocratic, underhand means by which the appointment was considered and approved.
How has Europe done in meeting its Paris Agreement commitments?
The EU is a signatory to the globally agreed Paris Agreement aim of “holding warming well below 2°C, and pursuing efforts to limit warming to 1.5°C.” which came into effect in 2016. To date, the EU has failed to meet any of the annual targets and while significant improvements have been made to reducing pollutants, those achievements have been matched by unparalleled destruction of biodiversity.
Another large stumble for the environment
The EU has long had the potential to be the driving force in persuading, in educating, in advocating and in delivering long overdue policies to fully and finally secure our environment for current and future generations. If Covid has thought us anything, it is that we need to rapidly accelerate our regulatory environmental efforts. Instead, the Green Deal does little or nothing to mitigate the impacts of climate change.
The announcement that BlackRock was given a seat at the Green deal table is a news item that barely made a ripple in the media. The EU has dealt a serious body blow to any organisation hoping the Green Deal would amount to something of substance. In truth, the Green Deal is nothing more than lip service and a vehicle to divert public money to large corporations.
Losing “new” from the US’s Green New Deal is a signal that the commission is not looking for system change and has no intention of rocking the boat with ambitious green policies and much tougher regulation of carbon financiers. Instead it is business, and politics, as usual. In truth it is engaging in greenwashing of itself.
Ursula von der Leyen promised us a Green Deal that would be Europe’s “man on the Moon moment”. Instead of fulfilling her promise, she has delivered not “one giant leap for mankind” but a substantial stumble into an increasingly bleak future.
Recommended FURTHER Reading
- Daniela Gabor is a professor of economics and microfinance at UWE Bristol and has written an article well worth reading on topic which is well worth a read The European Green Deal will bypass the poor and go straight to the rich . If you prefer, there is also more bite sized twitter thread.
- Also worth a read is The EU’s green deal is a colossal exercise in greenwashing by Yanis Varoufakis and David Adler.
- Nuns take on BlackRock over climate emergency https://www.theguardian.com/business/2019/dec/15/nuns-take-on-blackrock-over-climate-emergency
- BlackRock pours more money into companies destroying our climate than any other entity https://www.blackrocksbigproblem.com/
- The EU releases its Green Deal. Here are the key points https://www.climatechangenews.com/2019/12/12/eu-releases-green-deal-key-points/
- EU Commission unveils ‘European Green Deal’: The key points https://www.euractiv.com/section/energy-environment/news/eu-commission-unveils-european-green-deal-the-key-points/
- EU Climate Law dubbed a ‘surrender’ by Thunberg and a ‘disappointment’ by trade bodies and politicians https://www.pv-magazine.com/2020/03/05/eu-climate-law-dubbed-a-surrender-by-thunberg-and-a-disappointment-by-trade-bodies-and-politicians/
- What is the European Green Deal and will it really cost €1tn? https://www.theguardian.com/world/2020/mar/09/what-is-the-european-green-deal-and-will-it-really-cost-1tn#maincontent
- Environmental, social and corporate governance https://en.wikipedia.org/wiki/Environmental,_social_and_corporate_governance
- BlackRock to advise EU on green regulation for banks https://dnyuz.com/2020/04/13/blackrock-to-advise-eu-on-green-regulation-for-banks/
- BlackRock selected for European Commission study on integrating ESG into banking rules https://www.responsible-investor.com/articles/blackrock-selected-for-european-commission-study-on-integrating-esg-into-banking-rules
- ‘It’s outrageous’: U.S. Fed’s big boost for BlackRock raises eyebrows on Wall Street https://business.financialpost.com/financial-times/u-s-feds-big-boost-for-blackrock-raises-eyebrows-on-wall-street
- World’s largest investor BlackRock joins climate action investing pact https://thehill.com/changing-america/sustainability/climate-change/478005-worlds-largest-investor-blackrock-joins
- Exchange-traded fund (ETF) https://www.investopedia.com/terms/e/etf.asp