The European Commission’s appointment of BlackRock to provide advice on sustainability rules is to be probed by an influential EU watchdog following a backlash by politicians and green campaigners.
The European Ombudsman, the independent authority responsible for probing complaints against the EU, this week opened an investigation into whether the commission fully assessed the risks of conflicts of interest when it approved BlackRock’s bid.
Brussels’ selection in April of the world’s largest asset manager to advise on integrating sustainability into banking regulation met with strong resistance from MEPs and campaigners, who questioned BlackRock’s ability to act as an impartial adviser given its holdings in European banks and fossil fuel companies.
In a letter to commission president Ursula von der Leyen, ombudsman Emily O’Reilly said that she would investigate whether the commission had respected procedures regarding “the evaluation of any conflicts of interest and the measures to prevent any such conflicts”.
The probe comes in response to a complaint filed by two MEPs, Damien Carême and Marisa Matias, and NGO network Change Finance, who expressed “[concerns] about the adequacy of the measures presented by BlackRock” to prevent conflicts of interest and the ability of the commission “to monitor the effectiveness of these measures”.
The move places further scrutiny on the appointment, which could see BlackRock extend its influence in Brussels at a time when it is promoting its green credentials.
The ombudsman cannot force the cancellation of the mandate. However, a negative judgment would put the commission under more pressure to reconsider its decision. Almost 80 MEPs have submitted questions about the BlackRock mandate since April, and 92 organisations supported an open letter sent to Brussels by Change Finance.
BlackRock said it was “strongly supportive” of the commission’s aims of integrating sustainability into the financial system. It added that its Financial Markets Advisory unit had policies in place to “safeguard the sensitive nature of our client information, and operates behind a stringent information barrier”. These barriers had been reviewed and audited by clients including some of world’s largest institutions, it added.
The ombudsman showed it was not afraid to take a hard line on links between the EU and the private sector when it slammed the EU banking agency’s failure to block its executive director from becoming the head of a lobbying group.
In a staunch defence of the BlackRock mandate sent to aggrieved MEPs, Valdis Dombrovskis, the EU’s financial commissioner, denied the presence of conflicts of interest. He said that BlackRock had committed to a physical segregation between its Financial Markets Advisory unit, which holds the mandate, and the rest of its business. He added that the commission would terminate the contract should BlackRock not adhere “scrupulously” to its conditions.
But Mr Carême, the Green MEP to whom the letter was addressed, said that the commissioner’s explanation was “not satisfactory”, complaining that the commission had not made public details of the measures taken by BlackRock to prevent conflicts. “To resolve the conflict of interests, the contract should be cancelled and the tender reopened,” he said.
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