The nonprofit Consumers’ Research urged the Department of Justice and the Federal Trade Commission to conduct tougher enforcement efforts on investment firms like BlackRock in a letter sent on Friday.
The letter, which was exclusively shared with The Center Square, alleges large asset managers like BlackRock “routinely” invested in companies while using its ownership to push certain political and social ideologies.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, codified in the Clayton Act, requires companies to notify the DOJ and FTC before making certain large transactions in order to avoid potentially anticompetitive effects.
The letter said asset managers pushed ideologies by justifying the purchase of company shares under the HSR as “solely for the purpose of investment,” which is an exemption that allows a company to bypass a notice requirement and waiting period.
“Large asset managers are not above the law, and they must either comply with HSR or conduct themselves such that they fall within an exemption,” the letter reads.
The exemption comes under scrutiny when an investor “decides to participate in the management of an issuer,” according to the letter.
The letter cited evidence that investment firms use their ownership to advocate for political and social ideologies like net zero carbon emissions by 2050. The letter cited evidence such as a U.S. House of Representatives Judiciary Committee investigation, membership in climate groups, votes on shareholder proposals, and court cases confirming evidence of political motivations.
“BlackRock, State Street, and other large asset managers adopted a mixed motive to use their proxy voting power and their shareholder engagements for the mixed motive of achieving the environmental goals of activist asset owners, rather than focusing solely on financial returns,” the letter reads.
Consumers’ Research demanded the DOJ and FTC to investigate whether investment firms like BlackRock broke the rules.
“BlackRock CEO Larry Fink has repeatedly acted as activist investor, leveraging the savings of millions of Americans to pursue woke agendas that have nothing to do with fiduciary duty or maximizing returns,” Will Hind, executive director of Consumers’ Research, said in an emailed statement to The Center Square. “The federal courts have made it clear that firms like BlackRock cannot hide behind their ‘solely for investment’ defense while wielding their shareholder power to control or influence fundamental business decisions.”
The letter asserts that BlackRock had influence over companies like Exxon, Berkshire Hathaway Energy, Chevron Corporation, Jack in the Box and Wingstop to set goals for reducing carbon emissions or reporting on greenhouse gas emissions.
In 2021, BlackRock and State Street led votes to install directors chosen by “climate activists” onto Exxon’s board, according to the letter.
“Large asset managers similarly used the power of engagements to pursue non-financial objectives,” the letter reads.
The letter also cites a court ruling in Spence v. American Airlines, where BlackRock was found to engage in practices to influence and align with net zero emissions, although it was not apparent how those practices benefitted American Airlines financially.
“BlackRock couched its [environmental, social and governance] investing in language that superficially pledged allegiance to an economic interest[,] BlackRock never gave more than lip service to show how its actions were actually economically advantageous to its clients,” the court ruling read.
The Center Square contacted BlackRock and State Street for comment but did not immediately hear back.
