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By Sharon Kimathi, Energy and ESG Editor, Reuters Digital

Hello!

Another day, another attempt by United States Republicans to contest environmental, social and governance (ESG) policies in financial institutions. This time, Republicans set their sights on BlackRock Inc’s ownership of utilities companies, stating that the firm is “an environmental activist”.  

A group of 17 Republican U.S. state attorneys general asked federal energy regulators to review BlackRock’s ownership of utilities, citing the top fund manager’s involvement in industry efforts to limit climate change.

The motion before the Federal Energy Regulatory Commission (FERC) was filed just days after rival Vanguard Group overcame a related challenge from some of the same politicians.

The efforts are part of a Republican campaign against the growing use of ESG considerations by investors and company executives. In their motion on Wednesday the attorneys general asked the four-member body known as FERC to audit whether BlackRock has complied with a 2022 order that gave it permission to own more than 10% of U.S. utility company shares.

Larry Fink, Chairman and CEO of BlackRock, an interview with CNBC on the floor of the New York Stock Exchange  in New York City, U.S., April 14, 2023. REUTERS/Brendan McDermid

That waiver from antitrust limits was given because BlackRock functioned as a passive investor. But BlackRock has undercut that by joining groups like the Net Zero Asset Managers initiative seeking to influence utility company operations, the group claimed.

“Maybe BlackRock was a passive investor ten years ago, but today it’s an environmental activist,” states the motion led by officials including Indiana Attorney General Todd Rokita.

BlackRock and FERC representatives did not immediately comment. BlackRock, which runs some $9.1 trillion, has said it acts independently and that better ESG data from companies will help investors judge risks on matters like climate change.

Meanwhile, the pressure is piling up on Shell shareholders to support a climate activist resolution at its annual general meeting and vote against the oil major on most counts, Britain’s Local Authority Pension Fund Forum (LAPFF) said in a report seen by Reuters.

This follows announcements by the Church of England Pension Board, proxy adviser PIRC and a number of Dutch funds in favor of the climate resolution proposed by activist group Follow This.

Proposals on climate resolutions are not just limited to fossil fuel firms and financial institutions this annual general meeting season, as a trio of European asset managers has submitted a shareholder proposal urging Toyota Motor to improve disclosure of its lobbying on climate change.

It will be the first time that Toyota faces such a climate-related resolution at its annual general meeting, the funds said. Toyota’s board recommended that shareholders vote against the resolution, to be put to the company’s annual general meeting in June.

U.S. flag flies in front of a coal-fired power plant’s cooling tower at Duke Energy’s Crystal River Energy Complex in Crystal River, Florida, U.S., March 26, 2021. REUTERS/Dane Rhys

Martijn Rozemuller, Europe CEO at the global asset manager VanEck, shares the reasons why it chose to launch the ‘VanEck Oil Services exchange-traded fund (ETF)’:

“We launched an ETF focused on the upstream oil services sector even amid stronger ESG scrutiny and demand for sustainable investment solutions, as we see several compelling reasons for this.” 

“The first is that the shift to green energy sources like wind, hydrogen and solar will be gradual and will take time. As of now, renewables represent only around 5% of the total worldwide energy consumption.” 

“Especially at times where the need for safe and reliable energy sources has been highlighted by the geopolitical turmoil of 2022, it is clear that this transition will have to be accompanied by traditional fossil fuels like oil and gas.” 

“Firstly, gas will be important to phase out coal, which entails the highest greenhouse gas emissions per GWh of electricity produced.” 

“Secondly, even when the shift will have completely taken place, fossil fuels will potentially be needed to support the electricity grid in case renewables alone are not sufficient to satisfy the total demand.” 

“Moreover, the oil services companies we offer exposure to are actively reassessing their strategies in light of the green transition. Many of them are engaged in the renewable energy and green technology space performing activities concerning bioenergy, hydrogen and decarbonization.”

Thailand has among the highest household debt to gross domestic product (GDP) ratios in Asia – behind only South Korea and Hong Kong, according to a Bank for International Settlements ranking – and millions of people, one in every three, are trapped in debt.

Kavita Wongyakasem runs a small business in Bangkok, owns a two-storey house on the outskirts of the Thai capital, drives a pick-up truck, and sends her two daughters to good schools. But every day is a desperate struggle to find the money to keep her household afloat, said the 48-year-old, whose business provides services for a big energy company.

Swimming pools adjacent to houses, as drinking water supplies plunged to their lowest level since 1990 due to extreme drought, in Vacarisses, Spain May 4, 2023. REUTERS/Nacho Doce

A new law in Spain barring residents in Catalonia from refilling their pools due to fears of drought, is in focus in today’s ESG Spotlight. Elsewhere, multinational conglomerate Honeywell announced a new technology to produce sustainable aviation fuel.

Many people were drawn to the town of Vacarisses near Barcelona in the 1970s by the suburban dream of homes with large gardens and swimming pools to provide respite during long, hot summers. But now, that lifestyle is under threat as a severe drought forces authorities to reach for increasingly stringent measures to conserve water, including restrictions on filling pools.

A law expected to come into force in coming days will bar residents in the northeastern region of Catalonia, including Vacarisses, from refilling empty pools even as an abnormally warm spring suggests the coming summer will be equal in ferocity to last year’s, one of the hottest on record. The law will not apply to public pools or hotels.

An Air France aircraft, operated with SAF produced by TotalEnergies, is refueled before its first flight from Nice to Paris at Nice airport, France, Oct 1, 2021. REUTERS/Eric Gaillard/File Photo

Honeywell International announced a new technology to produce lower-carbon aviation fuel from green hydrogen and carbon dioxide captured from industry, which can help cut greenhouse gas emissions from aviation, one of the hardest sectors to electrify and decarbonize. Sustainable aviation fuel, or SAF, is typically made using biomass-based feedstocks such as soybean oil and used cooking oil. 

Honeywell’s new technology would combine green hydrogen – produced in electrolyzers from renewable energy and water – and carbon dioxide siphoned off industrial smokestacks to create lower-carbon methanol, which is then turned into fuels including SAF.

“The change in how ESG is perceived has triggered a frenzy of credential-signaling, but the ability of firms to discriminate between expertise and snake oil has yet to catch up.” 

Ranjita Rajan, Business Fellow at the Smith School of Enterprise and the Environment, University of Oxford

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