As Amazon fires spark unprecedented deforestation, a report released on Friday shows that BlackRock, the world’s largest asset manager, holds extensive investments in the sectors deemed responsible for the devastation of forests in Brazil.
With $6.5 trillion of assets under management, BlackRock was labeled the “world’s largest investor in deforestation” by the report’s authors – Friends of the Earth US, Amazon Watch, and Dutch research firm Profundo.
The report, BlackRock’s Big Deforestation Problem, looks at financial data from 2014 to 2018 showing the global investment management firm to be among the top three shareholders in 25 of the planet’s largest publicly traded companies with “deforestation risk”.
The data reveal that BlackRock’s holdings in six sectors – soy, beef, palm oil, rubber, timber and pulp/paper – have increased by more than $500m in the last five years.
Jeff Conant, the report’s lead author and senior international forest programme manager with Friends of the Earth US, said that “BlackRock’s investments are directly causing the forest fires in the Amazon and deforestation around the globe”.
“I don’t believe that BlackRock and their providers are even looking at deforestation risk,” he told Al Jazeera. “There are not a lot of worse companies out there than the companies on [our] list.”
Of the 167 deforestation-risk companies identified by the researchers, BlackRock held shares in 61 of them – valued at $1.5bn by the end of last year.
“Sound corporate governance practices, including how companies manage the material environmental and social factors inherent to their business models, have the potential to impact the long-term value of our clients’ assets,” BlackRock said in a statement provided to Al Jazeera.
“Our obligation as an asset manager and a fiduciary is to manage our clients’ assets consistent with their investment priorities,” the company added.
“Absent the option to divest from these companies, we engage with them to evaluate how they manage the material sustainability-related risks and opportunities within their businesses, and encourage them to adopt the robust business practices consistent with sustainable long-term performance.”
ESG: ‘Do whatever they want’
Conant said that BlackRock makes money off of environmentally destructive agribusiness, particularly through commodity holdings in index funds that passively track global markets.
“[BlackRock] can get the ESG industry to do whatever they want,” Conant said, referring to environmental, social and governance factors that thus far appear unsuccessful at screening out companies with deforestation risk from such funds. “Passive investment is an active problem.”
“Most ESG funds are based on data from the ESG industry, which is really not necessarily looking at the whole picture and scanning the right sources for information,” he added. “They are not thinking extremely deeply about what environmental impacts are – and their relative weights.”
Overuse of land, water and pesticides – when combined with the adverse effects of climate change – have contributed to fires raging in Brazil, as well as in the Arctic, Indonesia and Central Africa.
Conant said, however, that these blazes are “to be expected and we will see more of them”.
He also suggested that the problems were exacerbated by the “authoritarian regime of [Brazilian President Jair] Bolsonaro, which is being backed by global finance”.
High-risk holdings and conflict-linked securities could pose a dilemma for BlackRock that is financial, environmental and moral.
Earlier in August, the Intergovernmental Panel on Climate Change said that deforestation and other land-use practices account for almost one-quarter of greenhouse gas emissions.
“BlackRock can follow the lead of other global asset managers and make change for the good of the rainforest, the climate, and its customers by shifting investments out of companies wrecking the planet, and applying maximum pressure to change company behaviour,” said Moira Birss of Amazon Watch.
The report cited the Norwegian Government Pension Fund for having blacklisted many companies in BlackRock’s portfolios. In addition, CalPERS – which provides benefits for public employees in the US state of California – has recognised deforestation as a “material investment risk”.
“Responsible stewardship is about more than just public statements,” said Ward Warmerdam of Profundo, which performed much of the research for the report. “It is about aligning your investment strategy with broadly accepted environmental and social standards.”
Earlier this summer, a report by the Institute for Energy Economics and Financial Analysis faulted BlackRock for losing $90bn through fossil fuel investments during the past decade.
The new report says that BlackRock could instruct companies active in the Amazon to audit their supply chains, and in turn remove investments at all linked to the current fires.
“It takes time to unwind those investments but a public statement is very easy,” Conant told Al Jazeera. “[BlackRock] should ask all index providers to develop default fossil-fuel and deforestation-free investment funds.”
He criticised the Brazilian government’s efforts to “wipe out one of the world’s most precious ecosystems for short-term profit”, adding that BlackRock should “take an active stance in rejecting that offer to destroy the Amazon for business“.