BlackRock’s Larry Fink under fire

Greeting from New York, which is getting into the holiday season with tree lights, mask-free parties — and a sense of relief that the bizarre year that was 2022 is drawing to an end. As it does, there are two quite contradictory trends shaping the world of sustainability.

On the one hand, environmental, social and governance-based investing is under mounting fire from rightwing groups in America. Read our tale below about new attacks on Larry Fink, head of BlackRock, over this — including calls for his resignation.

On the other hand, more and more money is flooding into renewable energy and other ESG sectors, such as hydrogen. A few weeks ago, to cite one example, the Paris-based HY-24 fund raised €2bn from entities such as TotalEnergies, Axa and Baker Hughes — and more funds are mooted. See our story below about efforts to get proper measurement systems in place for hydrogen investments. And take note of another important development that emerged as we went to press: there has been a breakthrough in fusion technology that could potentially offer another clean energy source. Cue more investor excitement.

So which of these factors — namely the political backlash or the flood of investment bucks into green projects — will be more dominant in 2023? And will this reshape ESG, or even make the term redundant? We would love to hear your thoughts as the year draws to an end; please email the moralmoney@ft.com team. (Gillian Tett)

The hydrogen hype soars higher

Barely a day goes by without fresh debate about the future of electric vehicles in general — and Tesla in particular (not least because its share price has halved in recent months, knocking owner Elon Musk out of the slot of the world’s richest man). But amid all the EV excitement — and anxiety about the alarmingly limited supply of battery metals — many investors and industrial groups are now looking more closely at hydrogen too.

Companies in Japan and Korea have already developed hydrogen-powered cars. But the real focus is on marine transport and heavy industry. S&P Global predicts that annual global hydrogen demand will jump to 97mn tonnes in 2030 and 249mn tonnes in 2050 — from 70.4mn tonnes in 2020 — and nearly 90 per cent of the growth between now and 2050 is expected to come from new sectors like heavy-duty transportation, steel production, and long-term energy storage.

This is encouraging. But there is a catch: hydrogen production is energy intensive, and the supply of energy varies in its level of carbon intensity. So a race is now on to develop systems which will enable companies and financial groups to track this footprint.

Take an industry coalition called the Open Hydrogen Initiative. This, as we earlier reported, was established by the ratings group S&P in early 2022, together with GTI Energy (a consultancy) and the National Energy Technology Laboratory. The coalition has been carrying out pilot tests and this week it will announce that it has signed up more than a dozen companies, including National Grid, Shell, ExxonMobil, Dominion Energy, Duke Energy, DTE, and Southwest Gas Corporation. The body plans to start publishing data next year, and is using an open-source platform in a bid to crowd-test its systems and (it hopes) establish widely accepted industry standards.

It remains to be seen if these standards will be widely adopted, and other rival systems are emerging too from entities such as Deutsche Börse. But the battle to create transparent ways to track hydrogen’s footprint has the potential to become a fascinating case study in how to create credibility for an emerging technology (or not). And the move will be watched by governments, given that politicians such as Britain’s Boris Johnson have been embracing the fuel, business leaders such as Australia’s Andrew Forrest are jumping in — and the EU is building a so-called “hydrogen bank,” in a bid to wean the continent off fossil fuels.

The EU’s €3bn investment in low carbon hydrogen projects was “the latest in a raft of measures aimed at supporting the scaling of low carbon hydrogen markets”, said Alan Hayes, head of energy transition pricing at S&P.

Of course, if the data that emanates from the OHI next year shows that the fuel is not as green as proclaimed, when the entire production chain is analysed, that could puncture the hype around hydrogen. But right now the excitement seems set to bubble on — particularly given that the US’s Inflation Reduction Act is due to kick in on January 1, with its raft of subsidies for green tech. (Gillian Tett)

North Carolina treasurer: ‘BlackRock needs to be liberated’

The attacks on BlackRock’s approach to sustainable investing are getting personal. On Friday, North Carolina treasurer Dale Folwell called for founder Larry Fink to resign or be removed as chief executive of the $8tn asset manager.

“BlackRock needs to be liberated,” Folwell told Moral Money. “Mr Fink’s political agenda has gotten in the way of his fiduciary duty.”

The move is the latest in a series of blasts at the world’s largest asset manager from Republican politicians who argue that BlackRock’s use of ESG factors in investing is hostile to fossil fuel companies and hurts their constituents. Nearly half a dozen red states have promised to pull more than $3bn out of BlackRock-managed accounts.

But Folwell, who was first elected treasurer in 2016, is taking a different tack. The North Carolina Retirement Systems, the ninth largest public pension fund in the US, will use its $46mn in BlackRock shares, a roughly 0.04 per cent stake, to push for Fink’s removal.

Fink’s leadership is already under attack from the opposite direction. Bluebell Capital Partners, a small UK activist investor with a history of mobilising coalitions, revealed earlier this week that it had taken a 0.01 per cent stake and asked Fink to resign because BlackRock was insufficiently supportive of ESG.

Folwell said that he had no plans to move the $14bn that the state had invested in BlackRock funds: “There is nowhere I could go to get it done cheaper.”

But he has taken advantage of BlackRock’s new programme that allows institutional investors to vote their own shares rather than allowing the fund house to use its own judgment in proxy votes on controversial issues including ESG. “We have operationalised what needs to be done in the interest of our members,” Folwell said.

BlackRock, which had net US inflows of $84bn in the third quarter, said in a statement, “Over the past year, BlackRock has been subject to campaigns suggesting we are either ‘too progressive’ or ‘too conservative’ in how we manage our clients’ money. We are neither. We are a fiduciary. We put our clients’ interests first.” (Brooke Masters)

Smart read

If a company pollutes a town, does it need to clean up the mess after it leaves? That is the question which will be raised early next year when a landmark case against Anglo American, one of the world’s largest mining companies, will be heard in South Africa’s High Court.

The case revolves around a class-action suit pitching the Zambian town of Kabwe against Anglo American for alleged lead poisoning. Stand by for a big legal battle, and “test of international commitments to human rights abuses and access to justice for some of the poorest people living in an ongoing public health emergency”, writes Peter Hain in the FT. Hain is a former Labour MP who was an anti-apartheid campaigner in South Africa.

How effective is your company at combating climate change? The FT and data provider Statista are currently compiling the 2023 editions of Europe’s Climate Leaders and Asia-Pacific Climate Leaders — two surveys listing the businesses that have gone furthest in reducing their carbon emissions intensity. If you think your company might be eligible, please click through to the Europe and Asia-Pacific calls for entries, where you can find details of how to participate.