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Mon Jun 29, 2020, 07:39 AM

BlackRock Polishes Their Green Reputation While Emerging As An Unregulated Shadow Bank


Despite all its holdings and data offerings, BlackRock has avoided being designated a “Systemically Important Financial Institution” (or SIFI, a.k.a. “too big to fail”) by the Treasury’s Financial Stability and Oversight Council, set up by Dodd-Frank financial regulations, which would require it to be regulated by the Federal Reserve. Perhaps this is because the company spent the better part of the last decade bombarding lawmakers, Treasury officials, and FSOC members with campaign donations and reports making the case as to why they should be excluded from Dodd-Frank rules.

Under the leadership of BlackRock co-founder and Vice Chairman Barbara Novick, who announced earlier this year that she’s stepping down, the firm argued that regulators should focus on the various activities of nonbank financial institutions, rather than the SIFI designation, which would subject it to a wider array of more stringent regulations. To observers, the company’s calculus here seemed pretty transparent: The FSOC doesn’t have any meaningful authority to regulate the activities BlackRock urged it to focus on. “All they can do in that space is look at the risks those activities and products potentially pose, write reports, and issue nonbinding recommendations,” said Gregg Gelzinis, a policy analyst at the Center for American Progress and former Treasury staffer.

Now, Gelzinis said, “Trump administration officials have basically proposed BlackRock’s approach to financial oversight.” The rules governing BlackRock have gotten even more lax just since the pandemic began. Until recently, PNC Bank held a 22 percent share in BlackRock, making the latter subject to some of the same oversight as banks; since PNC sold those shares off at the end of May, however, those rules will no longer apply. BlackRock will now face even less sunlight than it has before. Representatives Katie Porter and Jesús “Chuy” García recently introduced a bill attempting to rein in BlackRock and other so-called shadow banks, though it has yet to pick up much steam amid Covid-19 and an ongoing uprising for racial justice.

As BlackRock has ballooned, the gargantuan asset manager has curated an image as the kinder, gentler face of Wall Street, simply stewarding the money of retirees the world over. Fink, the CEO, emphasizes “stakeholders” over shareholders while being more outspoken than his peers on a host of matters—climate change chief among them. In advance of the World Economic Forum at Davos, Switzerland, in January (and after BlackRock was singled out for criticism by climate activists), Fink’s hotly anticipated annual letter to CEOs and other clients—signed by its full board of directors—urged a new path toward a more “accountable and transparent capitalism” that takes the threat of rising temperatures seriously. The rhetoric came with a host of pledges: By the end of this year, Fink promised, BlackRock will stop its actively managed funds from investing in companies that get 25 percent or more of their revenue from coal operations, enhance transparency over how it votes in shareholder meetings, create investment products that screen for fossil fuels, ask companies how they plan to navigate the climate crisis, expand its offerings of products screened for Environmental Social and Governance, and make all of its actively managed funds “ESG integrated.” Having voted against every shareholder resolution brought by the investor coalition Climate Action 100+ through 2019, Blackrock will now join it.



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