The end of the campaign against BlackRock, and how somebody gave me some data
In the first few weeks of my involvement, I was struggling to find my purpose in the Change Finance coalition. Most of the regulars at the meetings were professionals and I couldn’t compete with their experience and knowledge of financial regulation. So I bluffed, which is a nicer way to say I faked it a little bit. I claimed that I could find new data on BlackRock’s investments domiciled in tax havens using the data sources of Show Me Finance, my previous project.
Technically, it wasn’t incorrect, but the European open data used by Show Me Finance didn’t provide management details on financial products, only lists of investments with transaction volumes. Tracking every company where BlackRock managed a position would have been enormous work, for which I didn’t have the time nor the skill. My contribution during the meetings of Change Finance was limited to complaining about the absence of discussion on corporate tax avoidance in the debates around sustainable finance, even if a United Nations panel included the problem of tax avoidance in the Governance part of the ESG principles for sustainable finance.
In November 2020, Emily O’Reilly recognized the conflict of interest in the contract awarded to BlackRock by the European Commission. However, the ombudswoman did not cancel the contract, under the pretext that the regulation governing conflict of interest for contracts with European Institutions was not clear enough. This will become a running theme in this story, BlackRock thrives in legal loopholes. The ombudsman’s verdict was a half victory for Change Finance. But truly it felt as if we were given a token of appreciation. “Thanks for your input, we’ll take it from here.” Especially after the Commission refused to show the emails they exchanged with BlackRock. BlackRock and the Commission continued to work behind closed doors.
The resulting report produced by BlackRock did not provide any conclusive insights on how to regulate sustainable finance. BlackRock’s analysts hesitate between different options with a bias towards self-regulation by banks, and scarce mentions of the stronger legislation supported by Change Finance.
At the core of the debate lies the European taxonomy, which has been promised for the beginning of 2022, but no one is holding their breath. The main idea behind the taxonomy is the classification of investments according to their sustainability. Establishing standards for ecological (green) and polluting (brown) investment, but there could also be a standard for social investment. Red ? Any color suggestions ? The political implications behind the idea of a taxonomy of investments are enormous. Who will be responsible for establishing the standards ? And who will enforce them ?
Change Finance supports a taxonomy based on science, enforced by democratically controlled public institutions, covering all financial products with financially dissuasive duties on polluting investments. In short, a “brown” taxonomy. BlackRock’s project is very different. They don’t want public institutions to mingle in finance, and they don’t want to pay more for polluting investments. But they are happy to pay less taxes for green investments. However, they would rather not have scientists decide what is a green investment. They will decide that themselves, with the banks. It’s called financial self-regulation. “Move along now, climate movement, let the grown-ups work.”
These positions are not supported in explicit terms in the report that BlackRock produced for the Commission, but the financier has shown its true intentions in the lobbying it supports in European institutions. €30 million per year, according to Reclaim Finance and l’Observatoire des multinationales, sent to organizations promoting a green taxonomy and financial self-regulation, financed together with the largest banks and money managers.
Today’s concern inside the Change Finance coalition is that the European taxonomy will look exactly like BlackRock’s idea.
In the Fall of 2020, while Change Finance was battling BlackRock’s influence over European politics, I was looking for a way to challenge BlackRock on the question of corporate tax avoidance. There was an interesting lead in the ETF tax loophole, because exchanged traded funds (ETF) are BlackRock’s most popular financial products, but nothing new or strictly relevant to the debate around sustainability. My luck turned when I met Annemieke during one of Change Finance’s group calls. She was working for an organization dedicated to exposing the financial network supporting deforestation. Her name is fictional, but the rest is told as I remember it.
“Ok, Antoine, thank you.” Annemieke cut short my excessively long introduction. “Sorry but I had a long day with a lot of meetings.”
“You said you can find data on tax haven financing, so how does that work ?”
I explained the technicalities of the process, which you can read in the appendix of the report I wrote following this meeting.
“Do you think you could find something on XXXX ? Our partners in the field are struggling to find incriminating evidence.”
She was asking for evidence of tax evasion, which is illegal, not to be confused with tax avoidance, which is legal. Morally hazardous, but legal. It is best I don’t mention the name of the company she was aiming at. Annemieke’s intention was to help local activists denounce the destructive activity of international firms involved directly in deforestation. Her priority wasn’t BlackRock, but rather the groups that BlackRock is financing. I met her halfway by proposing to research tax haven financing in all the forest-risk groups financed by BlackRock. We had a deal. An informal one, naturally. I wasn’t getting paid in any way, but I was given the hope of a publication. Spoiler alert, the publication didn’t happen.
The first data set Annemieke sent over contained all sorts of useful information on financial intermediaries between BlackRock and the forest-risk groups, but something was missing. The identification number of each individual financial product, which contained a two-letter code to identify the country of emission, thus a potential tax haven domicile.
“I see,” said Annemieke on our second meeting. “The information you need is not in the public data set, but we have it in the research data set. I will have to talk to Jasper about this.”
(not his real name)
Jasper was the consultant in sustainable finance who had provided the research data to Annemieke’s organization. His agency of experts in sustainable finance was contracted by Annemieke, and Jasper retained scrutiny over access to the data that Annemieke and her team used internally. I don’t know the exact terms of the contract binding Jasper and Annemieke, but Annemieke seemed to comply with a legal obligation when she introduced me to Jasper.
Next week, the meeting with Jasper, where we talk about tax havens and green forests.
This article is the fifth in a series.
Read next: Does the forest grow in tax havens ?
Start from the beginning: Campaigning against BlackRock, almost all the information you need
