Ex-stock analyst: When blaming BlackRock for Gaza is missing the forests for the trees

AS the tragic events in Gaza continue, some have started pointing fingers at major financial institutions like BlackRock (deemed the world’s largest asset manager) by claiming that they play a role in the conflict.

Critics argue that by investing in defence companies, BlackRock indirectly supports violence in the West Banks.

Recently minted Bersatu supreme council member and Machang MP Wan Ahmad Fayhsal Wan Ahmad Kamal has vehemently opposed BlackRock’s involvement in Malaysia Airports Holdings Bhd (MAHB) given the company’s connections to defence investments.

His fellow Opposition lawmaker Datuk Seri Takiyuddin Hassan also recently warned of BlackRock’s supposed influence on our national airports’ operator. This is an easy sell politically but it misses the mark.

As a former stock analyst, I can categorically state that blaming BlackRock for Gaza is misplaced.

Indirect shareholding

BlackRock is an asset management company, managing trillions in investments for clients like pension funds and sovereign wealth funds. It doesn’t control or direct the companies it invests in. It simply helps clients grow their money in line with market trends and financial goals.

Yes, BlackRock has investments in various sectors, including defence but these investments are part of broad, diversified portfolios.

But that doesn’t mean that BlackRock directly influences business policies of defence companies or their decisions, especially in foreign conflicts.

BlackRock’s role is far removed from any operational decisions in defence companies and even further removed from actions on the ground in Gaza.

Much of BlackRock’s investment in defence companies comes through passive funds such as its iShares brand of exchange traded funds (EFTs).

Mirroring major market indices, these funds hold shares in all companies within those indices, including defence firms. This means BlackRock holds these shares not out of active support for defence activities but because they’re part of a broader market.

This index tracking approach provides clients a diversified investment portfolio. As such, accusing BlackRock of supporting specific military actions due to passive index funds shows a fundamental misunderstanding of how asset management works.

In recent years, BlackRock has made strides to promote environmental, social, and governance (ESG) standards while encouraging companies to operate ethically and transparently.

BlackRock’s CEO Larry Fink has emphasised sustainable investing, pushing for better corporate governance and social responsibility. While these efforts can always be criticised, they show BlackRock’s commitment to systemic change – not direct involvement in conflicts.

Larry Fink (Image credit: Reuters)

Drawing distinction

In fact. blaming BlackRock diverts attention from the actual players in the Gaza crisis – governments and political leaders.

They are the ones making decisions that lead to wars and humanitarian crises. BlackRock’s involvement in Gaza, if any, is indirect and minimal at best. Real change must come from diplomatic efforts, peace-building and by holding the actual political actors accountable.

Moreover, BlackRock isn’t the only asset manager with shares in defence companies. It’s common across major firms like Vanguard and State Street.

Large asset managers hold shares in companies from all sectors, including defence because these companies are profitable. Rather than singling out BlackRock, the focus should be on improving how global finance intersects with ethical issues.

Calls to boycott or sanction BlackRock may feel satisfying but they miss the larger picture. For example, KLP, Norway’s largest pension fund, divested from Caterpillar due to its role in Israeli settlements but continues to hold BlackRock shares. This shows how the issues are so nuanced and complex.

To address the crisis in Gaza, the focus should be on diplomatic channels, humanitarian efforts and accountability for those directly involved.

Malaysia has consistently voiced its stance on Gaza at the United Nations (UN) and other platforms. Blaming financial entities like BlackRock for geopolitical conflicts is really missing the forests for the trees. – Nov 7, 2024

 

Dominic H’ng
Kuala Lumpur

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.

Main image credit: Al Jazeera

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