April 8, 2020. The European Commission concludes its public tender to prepare a study on how to integrate environmental, social and governance (ESG) criteria into EU banking supervision standards. And it awards the contract to BlackRock, which beat out eight other candidates. The contract has a total value of 280,000 euros, despite the fact that the European Commission initially expected the value to be 550,000 euros. BlackRock is the main investor in the IBEX-35, and one of the largest shareholders of several Spanish financial entities.
November 25, 2020. The European Ombudsman, Emily O’Reilly, considers that the Community Executive “should have been more vigilant when verifying” than the fund manager, the second largest in the world, “was not subject to a conflict of interest that could negatively affect the performance of the contract.” Of course, the recommendations of the European Ombudsman are not binding.RELATED
O’Reilly opened an investigation after receiving complaints from MEPs and civil entities, in which he analyzed how the European Commission evaluated BlackRock’s offer to carry out the study. And in this analysis, the Ombudsman has discovered that the company’s offer “raises concerns.”
First of all, says the O’Reilly resolution, “if a bidder has a direct or indirect financial interest in the evolution of a market, because it invests in that market or manages investments in that market, there is a clear risk that those interests can favorably influence the outcome of their work in their own market. “
Secondly, “due to the weighting applied by the European Commission in its assessment, the low price offered by the company optimized its chances of winning the contract: the award of the contract may allow the company to gain knowledge and exert influence over an area investment in growth and of increasing relevance for its clients and, therefore, for the company itself “.
Thus, the Ombudsman agrees that “there are legitimate concerns regarding the risk of conflict of interest that could negatively affect the performance of the contract, since the company has a clear interest in the development of future regulations of the EU that will affect itself and its customers. ”
Therefore, O’Reilly concludes that the Commission should have been “more rigorous and provide a broader perspective to verify that the company was not subject to a conflict of interest that could adversely affect its ability to perform the contract.”
However, O’Reilly acknowledges, failure to do so “does not meet the threshold of maladministration, given the limitations of EU rules on awarding contracts in such situations.” Therefore, the Ombudsman suggests that the European Commission “update its guidelines for public procurement procedures in policy-related service contracts, giving officials clarity on when to exclude bidders due to conflicts of interest that may affect negatively the performance of the contract “.
The Ombudsman also suggests that the EU Executive should “reflect on whether an update of the rules is required so that they are more proportionate to the current ambitions of the EU: the EU is planning unprecedented levels of spending and investment [por el fondo de recuperación de la crisis del coronavirus], which will necessarily involve important links with the private sector. “
As a conclusion to all this, the Ombudsman “considers that the European Commission should have been more vigilant when analyzing that the company was not subject to a conflict of interest that could negatively affect the performance of the contract. awarding the contract did not provide sufficient guarantees to exclude any legitimate doubts about the risk of conflicts of interest. It was questionable whether the European Commission concluded that there were no legal grounds to exclude BlackRock Investment Management from the procurement procedure. “
A detailed report by the Corporate Europe Observatory (CEO) and Change Finance Coalition – entities that appealed the contract to the European Ombudsman – explains how and why the European Commission “broke the rules of its financial regulation, mainly on conflicts of interest, by awarding a contract to BlackRock, the world’s second largest investment fund, in April this year. “
The contract tries to offer fundamental advice on the new sustainable financial architecture of the EU, and the investigation of social entities reveals three main reasons why the choice of Blackrock by the European Commission was wrong.
First, because “Blackrock continues to be a massive investor in fossil fuels, as well as other sectors that pose a particular threat to the climate.” Furthermore, the report notes that “Blackrock is the largest individual shareholder or, in some cases, the second largest shareholder of the top 15 European banks, which are often also involved in climate-damaging investments.” On the other hand, the study states that “Blackrock is deeply involved in an international lobbying campaign with other financial corporations to avoid ambitious new European rules and instead introduce unreliable voluntary measures developed by the financial industry.”
“The strong presence of the finance lobby in the next debate is probably inevitable,” the report says, “but inviting BlackRock to pave the way for EU decision-making on banking and climate change risks derailing the initiative from day one. BlackRock not only has significant financial interests in it, but has become one of the most prominent representatives of global financial corporations in the lobbying world. The only sensible thing the European Commission can do is just cancel the contract and start over. If that doesn’t happen, concerted action is needed sooner rather than later, to work in other ways to generate useful proposals that can help us mitigate or prevent climate change at one of its key sources: financing. Letting BlackRock set the agenda should not be an option. “
“If the Commission decides to go ahead,” affirm the social entities, “there will be an even greater need for others to start pushing for ambitious models of banking regulation and to ensure that this debate is not left to just a few people in the banking institutions. the EU. We need to increase public pressure on our politicians to oppose climate change and make banks do the same. “
Half a hundred socialist, green and unitary left MEPs signed an article signed by MEP Aurore Lalucq (S&D) in which they asked the European Commission to reevaluate the selection criteria of its allies, after the election of the US multinational BlackRock, specialized in asset management, as “environmental advisor”.
“The mandate of the European Commission is being executed by our Financial Markets Advisory unit, which is separate from our investment management business,” explained to La Celosía Ryan O’Keeffe, Head of Blackrock’s office for Europe, Middle East and Africa (EMEA). BlackRock created the Financial Market Advisory (FMA) during the 2008 crisis to advise governments, central banks and financial institutions.
The European Commission, for its part, has replied that it had followed EU procurement rules when sealing the contract. “The study that BlackRock will produce as an external contractor will be just one of many reports and consultations that will inform the European Commission’s policy on sustainable finance.” said the Commission’s spokesman, Daniel Ferrie.
BlackRock is the world’s largest investment manager, with $ 7.43 trillion in assets, The Guardian published, before the coronavirus pandemic caused a drop in the world market. Most of those assets are in products that track equity and bond indices, meaning the company controls large stakes in many of the world’s largest companies.
InfluenceMap’s analysis for The Guardian found that BlackRock in October controlled $ 87.3 billion worth of shares in fossil fuel companies that had 3.27 billion barrels of fossil fuel reserves. BlackRock is one of the top three investors in the world’s eight largest oil companies and one of the top ten investors in the world’s 12 largest banks from a systemic point of view.
BlackRock itself has been criticized for blocking progress on environmental issues. The Guardian’s analysis of ProxyInsight data found that BlackRock opposed or abstained in 82% of climate-related shareholder resolutions at companies whose shares it managed between 2015 and 2019.
However, last January he said he would ditch companies that get 25% or more of their revenue from coal, and vowed to start using his weight on companies to reveal climate risks.