“They need to start doing what they say they’re doing, rather than putting our pensions into autocrats’ war chests.”
A conversation with Josephine Moulds, reporter for The Bureau of Investigative Journalism
Josephine Moulds is a journalist at the UK-based Bureau of Investigative Journalism, where she covers banks, financial institutions, and climate change.1 Earlier this month, Josephine and her colleagues Soobin Kim, Matthew Chapman, and Simon Lock published a story exploring how BlackRock’s investments in Russian state-backed companies helped enable Putin’s invasion of Ukraine (“BlackRock Ploughed UK Pension Funds Into Putin’s War Chest”).2
I spoke with Josephine about the story, how BlackRock gets away with making different promises to different audiences (“They will never recognize that there is any inconsistency,” she says), and why so many people—including me3—spend so much time scrutinizing this company. The excerpts below have been condensed significantly and edited for clarity.
ADAM: You and your co-authors open with a bold statement: “Millions of British pension-holders have helped build the immense Russian war chest that emboldened Vladimir Putin to invade Ukraine.” Can you take us through your reporting and how you reached that conclusion?
JOSEPHINE: We knew that Putin felt able to start the war because of this huge war chest that he built up, so we decided to take a look at that. Something like 40 percent of the country’s income comes from taxes from fossil fuels. We took a look at those companies and also other companies that are part-state-owned, which pay huge amounts in dividends to the Russian state.
If you start looking at the main shareholders in these companies, the same names keep cropping up. The largest shareholder is the Russian state if [the companies are] state-owned, but they’re often followed by BlackRock and Vanguard. And those companies are significant because they look after so many people’s pensions.
We focused on the UK, but we could just as easily have done the US because BlackRock and Vanguard also look after the pensions of millions of people in the US. For a lot of us, our pension is the biggest investment that we’ll ever have. And yet we have very little idea where that money is invested, which results in this terrible situation where many of us are essentially complicit in this horrific war.
ADAM: One of the most damning moments in the piece is when you juxtapose Larry Fink’s response to Russia’s 2014 annexation of Crimea, with the response of one of BlackRock’s fund managers. Fink, as you write, “seemed happy to take credit for punishing Putin,” saying that “instead of having physical war we had economic war. And in one day, Russia lost. That’s a proud moment for me.” But as you write, “five days before those comments were published—on the day Russian troops threatened to shoot unarmed Ukrainian soldiers in Crimea—it emerged that BlackRock had been busy buying up cheap Russian stocks.”
It seems like no matter what Fink says or wants to believe, fund managers with the company, like the company as a whole, respond to financial incentives. Do you think we can expect to see anything change until the incentives facing those fund managers and other senior decision-makers at the company change?
JOSEPHINE: This is the fundamental question. Those fund managers are simply trying to enhance returns for their clients. They’ll be promoted, and they’ll be rewarded with bonuses, for doing so. The reason that we’ve focused on BlackRock for our last two stories is because it behaves in this perfectly normal way for financial institutions of maximizing returns for its clients. But at the same time, it tries to give the impression that its actions are guided by what’s best for the world. It’s that hypocrisy that we want to highlight so that BlackRock’s clients and their investors can actually go into these business relationships with their eyes wide open.
ADAM: When critics point out the discrepancies between their investment activity and their public statements, they often respond with one of two arguments. One is, “It’s our clients’ money, not ours, so who are we to tell them what they should and should not invest in?” The other argument is, “Most of our money is in index funds, so we can’t pick and choose what to invest in, even if we wanted to.”
As you note in the story, BlackRock has found these arguments entirely surmountable—if it’s beneficial to surmount them. You write that BlackRock “has…responded to criticism by arguing that many of its funds are invested through indices compiled by external providers. However, the company proved itself capable of decisive action on the fifth day of Russia’s current invasion of Ukraine, when it stopped all purchases of Russian assets, including in its index-linked funds.” Does the company see any inconsistency here?
JOSEPHINE: BlackRock’s aware that a growing number of people care about ESG—environmental, social, and governance—issues. We’re choosing ethical pensions, or we’re opting for green investment funds. That is why BlackRock are so keen to portray themselves as leaders in ESG: because they want to continue to attract that money.
I find it encouraging that so many people want their money to be invested sustainably. Financial institutions sort of have the power to save the planet because of the speed with which they can actually change the course of things. But to do that, they need to start doing what they actually say they’re doing, rather than putting our supposedly ethical pensions into autocrats’ war chests or fossil fuel companies.
ADAM: I wanted to ask you about BlackRock’s response to your reporting. They [told the Bureau], “Prior to the Russian invasion of Ukraine, the exposure to Russia in our clients’ portfolios represented less than 0.2% of BlackRock’s assets under management.” You have interviewed folks who [point out] that, even though the most recent Russian invasion of Ukraine is obviously on a different scale and magnitude [than] the previous decade, it’s not like this was the first time that Russia had invaded one of its neighbors. And on top of that, 0.2% of $10 trillion [BlackRock’s assets under management] is a lot of money. So I wonder what your response or engagement with the company has been when you challenge them on these stories.
JOSEPHINE: Their response was entirely predictable, partly because it’s always the response. Like you said earlier, they will always say we have no responsibility for the index funds. And their response to the Russia war was actually quite helpful in that respect because they exposed the lie in that response.
The other thing that they came back to me and said was, Oh, you’ve said our holdings increased after the invasion of Crimea—they went down and then went up again—but that’s just the value of the shares. But I had to hand the actual shareholdings, and the numbers of shares was also going up substantially each year.
I guess the really interesting thing is that they will never recognize that there is any inconsistency, even in the US bank story [referenced below] where we were pointing out that they have said one thing to one person and said the opposite to somebody else. That will never be something that they recognize.
ADAM: I want to talk about the story that you published last month (“BlackRock Tells Oil Regulator: Ignore Our CEO’s Climate Pledges”).4 You had an amazing scoop that earlier this year, in an attempt to preserve business opportunities with Texas oil and gas companies, a number of BlackRock execs told industry regulators [to] basically ignore Larry Fink’s high-profile promises about sustainability and decarbonization and “net zero.”
I would venture that most of us are at least somewhat cynical about corporate pledges. We assume to some extent that CEOs are going to say one thing and do another. Why do you think this particular instance—with BlackRock pledging that they’re going to continue to be investing in fossil fuels [despite making high-profile climate commitments to other audiences]—is more than just an example of corporate hypocrisy? Why does the gap between Larry Fink’s words and BlackRock’s actions matter so much?
JOSEPHINE: I think BlackRock matters so much because of the amount of clout they have. So BlackRock has $10 trillion of assets under management. And they’ve said that they will ensure that investment portfolio supports climate targets to keep global heating below 1.5 [degrees C]. And if they decided to do everything that that entails—not supporting any new fossil fuels; redirecting funds into renewables, particularly in the developing countries; and so on—that could change the world.
But instead, this hypocrisy is really damaging. By saying that they’re investing according to ESG and in line with [the] Paris [agreement], they attract the money from investors that genuinely want to protect the climate. And they also damage the credibility of the whole notion of ESG and sustainable investing. Worse than that, they push the argument that there’s no need for further regulation.
ADAM: We talked about financial incentives for BlackRock and BlackRock’s fund managers, but it’s equally daunting trying to juggle the financial and promotional incentives for journalists who want to do this deep reporting. The type of work that you and your colleagues do, where [does] that fit in the current media ecosystem? How do you carve out space—that can be mental and emotional space, that could be actual time, it could be financial space—when every incentive encourages the really quick hot-takes, listicles, and just trying to generate traffic and clicks?
JOSEPHINE: I think things have changed. I do think investigative journalism is in a good place at the moment. Newspapers are growing their investigative teams. There are a lot of new nonprofits in this area, like the Bureau. And, sadly, there’s a huge amount to expose—there’s a lot of corruption and abuse going on. But there’s really great work going on shining a light on that.
We’re a nonprofit. We’ve got an amazing group of funders that support our work because, like you say, investigative journalism takes a long time. So we do that kind of time-consuming work. And then we publish with [major outlets] to make sure that our work gets in front of as many people as possible.
We’re getting the stories, but also we do a lot around impact. We make sure that our work gets in front of the right people. That US banks and BlackRock story—I briefed a senator on that story. We submitted evidence to the SEC. We do that kind of thing for all our stories. We’ll contribute evidence to hearings, or we’ll work with lawyers to make sure that our work is helping to drive change.
You can follow Josephine at @jomoulds. To learn more about the Bureau of Investigative Journalism, follow @TBIJ, or visit thebureauinvestigates.com.
https://twitter.com/jomoulds; https://www.josephinemoulds.co.uk; https://twitter.com/tbij; https://www.thebureauinvestigates.com
https://www.thebureauinvestigates.com/stories/2022-04-05/blackrock-ploughed-uk-pension-funds-into-putins-war-chest
https://www.levernews.com/for-blackrock-the-climate-crisis-is-a-win-win-win
https://www.thebureauinvestigates.com/stories/2022-03-09/blackrock-tells-oil-regulator-ignore-our-ceos-climate-pledges