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BlackRock is backing a coalition of U.S. police and firefighter unions that is pushing to keep politics out of pensions, a recent effort to counter the backlash against environmental, social and governance (ESG) investments.
The world’s largest money manager is the only financial group among the founding members of the Alliance for Prosperity and a Secure Retirement, a Delaware-registered nonprofit that warns on its website that “politics has no place in Americans’ investment decisions.” After coming under fire for its advocacy of sustainable investing, BlackRock has increasingly emphasized the primacy of investor choice.
A handful of small businesses and consumer nonprofits are also members of the alliance, which launched earlier this year amid a flurry of ESG-related activity. According to law firm Ropes & Gray, 44 state legislatures considered 162 bills in 2023, with another 76 proposals introduced this year. About 80 percent of the proposals sought to ban consideration of sustainability factors, while the rest actively promoted it.
“We are not pro-ESG. We are not anti-ESG. What we are is ‘pro’ letting investment professionals, who have a fiduciary duty to their beneficiaries, do the work they are supposed to do,” said Tim Hill, a retired Phoenix firefighter who chairs the alliance, told the Financial Times. “We are ‘anti’ politicians, from the right or the left, who interfere with that fiduciary duty so that they can implement a political, social agenda.”
Hill said the group was set up to mobilise members of the pensions industry in support. “We decided we would do it differently by engaging the industry to help us, primarily in the financial burden of reducing and protecting our funds and fund managers,” he said.
BlackRock said in a statement that it was “proud” to support the alliance, adding: “As a fiduciary, our mission is to help more people experience financial wellness at all stages of life. The alliance is one of many organizations that BlackRock supports and are committed to helping more Americans retire with dignity on their own terms.”
The $10.5 trillion money manager has been at the center of the political battle over ESG since 2020, when CEO Larry Fink banged the drum for sustainable investing, pledging in his annual letter to “make sustainability an integral part of portfolio construction and risk management. . . governments and the private sector must work together to pursue a transition that is both fair and just.”
BlackRock became a target for both Republican politicians who objected to what they described as “woke capitalism,” and progressives who wanted the company to continue to force the companies it invests in to decarbonize.
Over the past three years, BlackRock’s stewardship has become much more skeptical of climate-related shareholder proposals. Last year it voted against most of them, saying the others were too prescriptive or not in the financial interests of its clients. At the same time, assets in the firm’s largest ESG fund have halved since the end of 2021.
BlackRock revamped its lobbying and public relations efforts last year, and Fink has placed a much greater emphasis on pension policy and infrastructure investment. He used his 2024 letter to warn of a looming pension crisis caused by changing retirement and work patterns.
On BlackRock’s website, the Alliance for Prosperity is listed as one of 13 organizations it works with to encourage discussion of pension issues. The group is primarily supported by public safety unions, which have historically been more conservative on climate and social issues than some of their service sector counterparts. It also includes a federation of construction unions whose pension funds hold $800 billion in assets, including the largest electricians’ union in the U.S.
The group has reached out to more liberal unions, including at least one major teachers union, but so far no union has signed on.
Hill said labor groups and pensioners have been concerned for several years that politicians see pension funds as “a pot of money that they can use to further their current political or social agendas”.
“It is always the workers who do the work, pay the political costs and pay the financial costs to defend their own country. [pension systems]generally without any help from the rest of the industry,” said Hill.