Endowment funds with BlackRock under scrutiny

In each financial year for a decade, KCL’s ever-growing portfolio banked more with BlackRock funds than with those of any other asset manager, a freedom of information request has revealed.

During that time, BlackRock’s own climate record, and risk, has been far from “sancte et sapienter”. Described as the “world’s largest investor in deforestation”, the company is deeply entangled in a trend of international banks financing deforestation. Perhaps most damningly, Roar has found BlackRock has often failed to exert its varying financial influence over polluting companies.

KCL now invests over £37 million in BlackRock funds, accounting for about 16% of the now £230 million endowment trust to fund studentships and other academic posts. Since 2010, a total of over £650 million has been invested in BlackRock, producing nearly £15 million of dividend income.  BlackRock’s portion in KCL’s then £172 million endowment fund peaked at 63% in 2016-17, the same year as the Paris Agreement. The share has decreased in recent years after KCL’s Investment Committee sought more accumulation funds (where no dividends are paid out).

The revelations come in the wake of a new “Complicity in Destruction” report by Amazon Watch and Association of Brazil’s Indigenous Peoples. BlackRock has allegedly failed to “pressure the companies it invests in to take measurable action to end deforestation” and lacks a “policy to handle investments that may impact the rights of Indigenous peoples”.

Dr Grace Iara Souza is fellow at KCL’s Brazil Institute, postdoctoral researcher at LSE, and specialist in the political ecologies of the Amazon. After earning her master’s and doctorate from KCL, she has taught in the geography and international development departments. She has previously expressed her views on the funders of deforestation of the Amazon. She expressed disappointment at KCL’s record of investments in Blackrock to Roar saying,

“It is infuriating to learn that the environment we learn and are teaching here at King’s that should be protected for the whole global human security is being destroyed with funds from King’s College London.

“The Amazon is currently reaching a tipping point due to deforestation and it is unacceptable that a lead research institution, with academics contributing to the UN The Intergovernmental Panel on Climate Change (IPCC), can hide behind the ESG statements while funding deforestation in the Amazon and Cerrado. I would expect that King’s would not only honour its ethical commitments with climate emergency and divest its investments from any source of deforestation but would also incentivise other universities to do the same”.

BlackRock holds securities amounting to $8.2 million in 7 of the 11 companies found by Amazon Watch to have a record of exploiting this vital absorber of carbon, and the world’s richest ecosystem. This includes mineral mining companies Vale and Anglo American, reported to have polluted the rivers and lands of the Xikrin and Munduruku Indigenous people respectively. 

Gustavo Faleiros works as Environment Investigations Editor at the Pulitzer Center on Crisis Reporting, founded the InfoAmazonia network, and studied a master’s course in Environment, Politics, and Globalization at KCL. On the issue of deforestation, he reports pessimism. He said the historical issue of land-grabbing is being intensified as various areas of the Amazon suffer from a “big increase in illegal mining in Indigenous territories” for resources such as gold. Describing it as an “epidemic”, he said “this is [a] huge and growing [problem] and there is no solution in sight.”

Dr John Hemming CMG, a leading historian of the Amazon and its people, has seen most of the Indigenous peoples in the report. He told Roar it was a “powerful and well researched exposé of the extent to which gigantic companies are invading indigenous lands and destroying tropical rainforests”, and that he was “appalled to learn that Cosan/Raízen [in which BlackRock is a principal shareholder] are somehow growing sugar for ethanol” in the Indigenous land of the Xavante. He pointed out, however, that much illegal deforestation or mining in Indigenous or other protected areas is done by companies without public shares in which BlackRock could invest. He added that it can be “very difficult to prove that the origin of timber, beef or soya is really as correct as is claimed.” 

Deforestation is a leading cause of biodiversity loss, carbon emissions, and wildfires. Professor Anthony Pereira, former director of the Brazil Institute at King’s, studies the political drivers of deforestation in the Amazon. He said he was “not surprised that there are allegations” of this nature, given two factors, that “big agribusiness in Brazil attracts a lot of international investors”, and that companies like JBS (in which BlackRock is the third largest shareholder) “don’t monitor their supply chains closely enough to know, for example, that the cattle they purchase weren’t grazed on recently (and illegally) deforested lands in the Amazon.” When asked about the effects of Covid, he said it is suspending the normal work of agencies such as the Chico Mendes Institute for Biodiversity Conservation, and the Brazilian Institute of Environment and Renewable Natural Resources (most of whose fines, he added, are not paid). 

KCL’s Socially Responsible Investment Policy explains how a pooled approach offers no “direct control over which companies are invested in – and therefore [King’s] cannot decide immediately to invest or disinvest in any particular industry or sector”. Yet in 2017 KCL announced an ethical investment policy expressing concern “about the dangers of human-induced climate change”.

The university, which identifies itself as “active participant in debates concerning ethical investment”, says that funds are “reviewed to ensure they operate within both the letter and the spirit of its ethical investment policy”. 

The policy expresses an expectation for “investment managers to engage with companies through the judicious and transparent use of voting rights and informal dialogue to encourage better management of ESG risks and opportunities”. 

Victoria Turner, chair of the KCLSU Sustainability Committee, told Roar they have decided that lobbying for divestment is a top priority. “Despite KCL’s aim to divest from fossil fuel companies by 2022, they seem to have created a loophole whereby KCL shirks any liability for investments made to companies who in turn fund fossil fuel initiatives. This contradicts the message of their Ethical Investment Policy, and as a Student Union committee, we condemn this and intend to investigate it thoroughly.”

Most of the $408 million BlackRock manages on behalf of high deforestation risk meatpackers is held in exchange-traded funds. An example of the so-called “passives problem”, this investment escapes any “Environmental, Social and Governance” criteria BlackRock set, and avoids proxy voting.

As for active investment, NGO Banktrack reported that BlackRock “voted against or abstained from voting on every single shareholder resolution requiring companies to act on deforestation since 2012, and lack clear policies to engage with companies on [deforestation]”. 

London-based InfluenceMap found that BlackRock leads a “small group of individual financial institutions…that appear to be resistant towards stringent regulation”. Extensive digging revealed that BlackRock has consistently voted down pro-environment resolutions in coal companies such as Woodside Energy and Santos. 

BlackRock’s thermal coal-dense portfolio has $90 billion in fossil fuel companies, with the potential for 5.5 gigatonnes of CO2 emissions. That represents nearly a fifth of global CO2 emissions in 2019, according to the International Energy Agency. In 2018 the United Nations Intergovernmental Panel on Climate Change (IPCC) called for a 45% reduction in greenhouse gas emissions in order to avoid the worst risks of climate change. 

BlackRock is said to be taking measures to avert its climate risk, which it says is also an investment risk. During an International Monetary Fund panel on post-Covid recovery, BlackRock CEO Laurence Fink said: “I’m not here to be pollyannaish about [solutions]… but I think through transparency, through conversations like this, we are bringing the problem forward and we are addressing the problems now”.