The Federal Energy Regulatory Commission gave the nation’s largest asset manager to continue to acquire up to 20% of voting securities for utility companies for another three years.

• The Federal Energy Regulatory Commission gave BlackRock reauthorization to acquire up to 20% of voting securities for certain public utility companies on Thursday, despite some concerns about the asset manager’s role in those companies and its prior climate commitments.
• The renewal extends BlackRock’s blanket authorization for another three years — an extension that was protested by states, the non-profit Consumers’ Research and others. The groups claimed that BlackRock was an active investor and the climate alliances it was previously a member of qualified as holding companies, according to the April 17 reauthorization letter.
• The nation’s largest asset manager said such claims “lack merit.” FERC ultimately found the states’ argument that sustainability-focused groups such as Climate Action 100+ and the United Nations-backed Net-Zero Asset Managers initiative qualify as holding companies “unpersuasive.”

Dive Insight:

To support its case for reauthorization, BlackRock said that it is managing approximately $52 billion in investments in approximately 54 companies that fall under its current authorizations, and that opponents’ claims would “limit investment in the energy industry.”

A BlackRock spokesperson told ESG Dive Thursday via email that the asset manager appreciates FERC’s approval and “thank[s] them for their engagement.”

“At a time when energy affordability and reliability are especially important, we look forward to continuing to provide billions of dollars in capital for the American energy sector on behalf of our clients,” the spokesperson said.

BlackRock’s prior blanket authorization allowed the asset manager to acquire Global Infrastructure Partners for $12.5 billion last year, despite protests from consumer advocacy, private equity and environmental nonprofits. BlackRock cited the Commission’s prior decision for the GIP case in its reauthorization case, which included determinations that the firm does not exercise control over the holdings and has acted in line with the authorizations, and the authorization has not led to adverse effects on competition.

BlackRock also pointed to its tendency to vote with management during proxy season, as well as its voting record on environmental, social and governance topics in recent years. The asset manager said over the past three years it has not supported any environmental or social proposals at traded utilities and supported just 4% of environmental and social proposals in the most recent proxy season.

Additionally, while the states challenging the reauthorization held that climate alliances like CA100+ and NZAM should be considered “horizontal organizations” and “holding companies,” FERC said it disagrees with that representation of the organizations, noting that “neither owns shares in public utilities or holds any voting rights or other ownership interests.”

Twenty states challenged the reauthorization: Arkansas, Arizona, Florida, Idaho, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia and Wyoming.

“And, in any event, we note that Blackrock represents that it is no longer a member of either organization,” FERC wrote. BlackRock withdrew from NZAM at the beginning of this year — leading the initiative to suspend operations — and transferred its CA100+ membership to a smaller international arm last year.

Despite the approval, FERC Chairman Mark Christie said in a concurrence that he maintains concerns that BlackRock could use its ownership of “competing assets to exert market power.” Christie also shared the states’ concerns about BlackRock’s and other large asset managers’ participation in investor advocacy organizations.

“We are faced with the reality that public utilities face already large and still growing capital needs, including to fund investment in greatly needed utility assets, such as power generation,” Christie wrote. “It is a fact of economic life that public utilities regulated by the Commission must seek investment capital from wherever it is available, and much of it is now either owned or managed by huge asset managers.”

The FERC Chair said that though he supports extending the reauthorization, he said it comes with a “compelling need for continued vigilance over BlackRock’s actions during this period.”

https://www.esgdive.com/news/FERC-grants-blackrock-renewed-authorization-for-large-utility-i/745790/