The European Commission has selected BlackRock as advisor to define the ways in which European banks will integrate ESG sustainability requirements into their business. The Financial Market Advisory (FMA) Division of the largest asset manager in the world was awarded the 550,000 euros foreseen by the tender published by the Commission, surpassing 8 other competitors, including only 2 PMIs. In particular, BlackRock will indicate how: (i) banks should integrate ESG factors into the risk management process and their strategies; (ii) the authorities should integrate ESG risks into prudential regulation.
The circumstance that BlackRock has been engaged in promoting a transition to sustainability cannot be enough to appease a strange sense of unease about the outcome of the European call.
To date, BlackRock invests a large part of its assets in brown companies, while it is among the top 10 shareholders of the 12 most systemically important global banks. It cannot be overlooked how the asset manager may have convenience in directing the transition towards a green economy, according to specific and subjective perspectives.
The question is simple and has nothing to do with BlackRock’s undisputed ability to produce studies and proposals that will certainly prove useful to European institutions and operators, also due to the specific point of observation that their investments allow them.
Rather, it has to do with some behavioral ethics issues that now seem to be forgotten by operators and institutions. Wouldn’t BlackRock have done better to offer its contribution for free? Nobody can believe that the FMA division needs 550 thousand euros – 0.012% of BlackRock’s 2018 operating profit – to finance the study. The markets would have appreciated, the operators too, the Commission could have activated, with the same funds, the skills of some European research institutes, probably with fewer resources than the financial giant.
The Commission kept reiterating that what will result from the study will be only one of the input tools on which to package specific proposals, and that BlackRock has formulated the best offer. We have no doubts: it is logical to think that BlackRock itself internally subsidizes part of the study, well beyond the scarce funding made available by the Commission (perhaps, this is also the reason for such a reduced participation in the call for European SMEs).
So, without wanting to demonize this story – of which we will follow the results with curiosity – would it not be the case that the Commission made a reflection on how to rethink the structures of its tenders, possibly also favoring partnerships between financial operators and independent research institutes? It should not leave anyone happy – not even BlackRock – that a European tender of such crucial importance cuts, in fact, universities, research institutes and think tanks of excellence.