NYC's Lander Recommends Dropping $42 Billion BlackRock Mandate

Key Concepts

• Climate Change Engagement: The process by which asset managers interact with companies they invest in to encourage climate-friendly practices.
• Portfolio Companies: Companies in which an asset manager invests on behalf of clients.
• Asset Managers: Firms that manage investment portfolios for clients, such as pension funds.
• Pension Funds: Funds set up to provide retirement income for employees.
• Fiduciary Duty: The legal and ethical obligation of a financial advisor or asset manager to act in the best interests of their clients.
• Divestment/Disengagement: The act of selling off investments or ceasing to engage with companies.

Brad Lander's Initiative and BlackRock's Role

This discussion centers on the culmination of efforts by Brad Lander, which began several years ago. In 2022, Lander expressed a desire to engage with BlackRock and scrutinize how the asset manager was interacting with its portfolio companies regarding climate change.

City Pension Funds and Asset Manager Accountability

This year, BlackRock, alongside 49 other asset managers responsible for managing funds for three of the city's pension funds, was required to submit plans by June 30th. These plans were to detail the steps each asset manager intended to take to hold their portfolio companies accountable for climate change. Lander has spent approximately five months reviewing these submitted recommendations, with the announcement of his findings made this morning.

BlackRock's Response and Lander's Recommendation

In response to these requirements, a managing director from BlackRock wrote a letter to Lander, alleging that the firm was "abdicating its financial duty" and undermining the "retirement security of hardworking New Yorkers." The speaker asserts that this claim is "absolutely not the case."

Asset Managers Recommended for Disengagement

The recommendations extend beyond BlackRock. Fidelity Investments and Panera are also mentioned as firms that Lander is recommending be disengaged from.

Outcome of the Review

Out of the 49 asset managers reviewed, 46 met the established criteria. Mr. Lander is recommending that the city's pension funds continue their relationships with these 46 asset managers.

Scale of Mandates Recommended for Dropping

BlackRock has the largest mandate recommended for dropping, valued at $42 billion. Fidelity Investments and Panera, combined, manage approximately $750 million in assets for the pension funds, and their mandates are also recommended for termination.

Synthesis/Conclusion

Brad Lander's multi-year initiative to assess asset managers' engagement with portfolio companies on climate change has resulted in a recommendation to disengage from BlackRock, Fidelity Investments, and Panera, citing their perceived inadequacy in holding companies accountable for climate action. Despite BlackRock's counter-argument of fiduciary duty, Lander's review found that 46 out of 49 asset managers met the required standards, with BlackRock's $42 billion mandate being the most significant recommended for termination.