Insights
Should we stay or should we go?
The case of BlackRock, Aramco & $161 billion
“After the appointment of Amin Nasser, the Chief Executive of Saudi Aramco (the world’s largest oil producer) to the board of Blackrock, we have decided to divest." Paul Brownsey CIO
When we heard financial giant BlackRock were investing over $2 Billion to help New Zealand transition to 100% renewable energy we took notice – the world’s biggest asset manager coming to help us become clean and green?
When asked about the announcement by Checkpoint on Radio New Zealand, John Berry, Pathfinder CEO said “We shouldn't be afraid, but we should be aware that Blackrock’s motivations and mission will not always align or intersect with our motivations and mission as a country” stating BlackRock would describe themselves as a ‘responsible investor’ who consider the transition to a low carbon world seriously because climate change will impact future financial returns. Rather than necessarily doing it because it is the right thing to do for our communities, future generations or ecosystems.
Pathfinder has had a small holding in Blackrock for some time in our broad diversified international equity exposure. Our reasons for that says Pathfinder Chief Investment Officer and co-founder Paul Brownsey:
“Despite a fair amount of negative chat about Blackrock, it wasn’t a company that screened poorly on a responsible investment basis.
“Blackrock, through its clients, is a large investor in the new technologies we need to transition to a low carbon world and while we had felt BlackRock could do more in this space, we continued to hold their stock while they legitimately made progress. From a financial perspective it has been a good, stable investment, typically with good, reliable earnings that tend to surprise on the upside”.
But one week on, things changed when Blackrock announced the appointment of Amin Nasser to their Board of Directors. Nassar is the chief executive of Saudi Arabian Oil Company “Aramco” – the world’s largest oil company quoted by The Guardian as recording a $161 billion profit for 2022. The Saudi Arabia government owns 98.2% of the company.
Last October Aramco announced a new US$1.5 billion fund to support the global transition to cleaner energy. However, when we compare that to their $161.1 billion income this clean green fund represents a commitment of less than 1% of their revenue.
In an apparent swirl of contradictions, BlackRock, who are reported to have $9.4 trillion under management, have been vocal about sustainability in recent years but regarding the announcement on Monday they appeared to be prioritising “the importance of the middle East” over transitioning to a low carbon world. In their recent 2030 net-zero statement they’re upfront about their commitment to remain long-term investors in carbon-intensive companies because they play crucial roles in the economy and in a successful transition stating that “the success of these companies will be critical to the global economy, the world’s low carbon ambitions and our clients’ long-term financial goals.”
Now, on the one hand, Independent Director’s aren’t responsible for managing the day to day operations of a company. And one Director shouldn’t have a governing sway over all the others. It’s possible that Nasser was hired for his general competency and not because of his connections to the oil industry or the Saudi Government. But, on balance, we decided it wasn’t worth the risk. Nasser’s appointment sent a signal and that signal doesn’t align with our goal of prioritising a transition to a lower carbon world.
Pathfinder has decided to divest all our shares of BlackRock. Here’s what our co-founders say on the matter:
“After the appointment of Amin Nasser, the Chief Executive of Saudi Aramco (the world’s largest oil producer) to the board of Blackrock, we have decided to divest. Why? It makes us question Blackrock’s commitment to decarbonisation.
We don’t yet know enough about how much influence Nasser will exert. Despite that, the message Blackrock is sending with his appointment is not one we align with. For us and for our New Zealand investors, who place as much value on ethics as they do on returns, the risk of being invested in Blackrock now outweighs the benefit. We’ll begin the process of divestment immediately”. Paul Brownsey, Chief Investment Officer, Pathfinder
“…We seriously question the size of BlackRock’s commitment to renewable energy. This undermines everything BlackRock has said and done over the last five years about it leading the transition to a lower carbon world”. John Berry, Chief Executive Officer, Pathfinder
For more information on our ethical investment process you can check out our Sustainability Report and our Ethical Investing Policy.
For more reading on this matter please visit these media articles:
Should Blackrock worry us? | Stuff.co.nz
Pathfinder to divest BlackRock equity after oil boss joins board (nbr.co.nz)
