【February 20, 2025 Epoch Times News】(Compiled by Epoch Times Reporter Qiu Sheng)
Top U.S. asset management firm BlackRock has suspended meetings with some investment portfolio companies out of concerns over potentially violating the new reporting rules issued by the U.S. Securities and Exchange Commission (SEC) last week.
The U.S. Securities and Exchange Commission recently issued an interpretation requiring fund companies to submit broader ownership disclosure data when pressuring asset management companies on certain Environmental, Social, and Governance (ESG) issues, with BlackRock being one of the affected companies.
BlackRock and other asset management companies usually engage in discussions with companies regarding shareholder proxy voting matters ahead of promoting left-wing radical ESG movements, as well as discussing routine proxy voting issues at annual shareholder meetings.
However, this practice is now being questioned due to the guidance from the SEC, which is widely interpreted as aimed at curbing the advancement of ESG principles in investments. This change imposes more stringent regulatory requirements on fund managers attempting to influence company behavior.
Kai Liekefett, a partner at Sidley Austin, stated, “This directive is like a hand grenade that exploded in the proxy fight left unresolved last week.”
A person familiar with the matter stated that BlackRock has temporarily suspended “corporate governance” meetings to assess the implications of the SEC regulatory changes.
The SEC’s move is part of a broader regulatory effort by state and federal officials to control the power of the largest fund managers, as these funds typically hold up to 10% of the shares in many U.S. companies due to the massive scale of index tracking funds.
Before February 11, the SEC rule stipulated that when fund managers made suggestions to companies on issues ranging from executive compensation to environmental policies, holding more than 5% of a company’s shares didn’t constitute “influence” over the company. Therefore, they were allowed to submit a relatively brief ownership form—specifically the 13-G form intended for “passive investors.”
However, under the new rules, the threshold for triggering the more stringent 13-D filing has been expanded. Traditionally, the 13-D filing was primarily reserved for activist investors such as hedge funds or investment managers aiming to influence control.
Large fund managers typically urge companies to disclose climate risks, diversify their boards, and take other measures they believe align with long-term shareholder interests. However, the new guidance has made their usual practices more complex and difficult to navigate.
The new SEC rules appear to be closely tied to the U.S. cultural war.
The 13-D form requires investors to provide detailed explanations on how and why they acquired the shares, as well as the investment purpose. The deadlines for submitting stock transaction updates to the SEC have also been tightened.
With over $110 billion in assets under management, BlackRock has faced strong pressure from conservative lawmakers in the U.S. over concerns of potential misuse of its influence on American businesses.
The SEC’s guidance comes against the backdrop of the agency taking a series of actions to move away from the left-wing policies of the prior government. SEC Chairman nominee appointed by President Trump, Paul Atkins, is currently awaiting Senate confirmation.
It remains unclear whether State Street, one of BlackRock’s major competitors, has also canceled meetings due to these issues.
According to sources, Vanguard, a top mutual fund management company, has also suspended meetings with investment portfolio companies.
The company stated that it prioritizes transparency and that, “We will continue to work constructively with policymakers to address issues related to passive investing and proxy voting.”
Generally, investment decisions are primarily based on financial return potentials at specific risk levels. However, political considerations and other standards have always played a role in determining where funds are allocated. As an investment principle, ESG places environmental issues, social concerns, and corporate governance at the forefront.
By 2023, the ESG movement had evolved from the UN’s Corporate Social Responsibility Initiative into a global phenomenon, with assets under management exceeding $30 trillion.
Critiques of ESG vary depending on perspectives and areas of concern. These areas include data quality, lack of standardization, evolving regulations, and politics; greenwashing (i.e., co-opting environmental concerns); and the diversity of social impact definitions and assessments.
Critics argue that ESG serves as the practical extension of government regulations, with major investment firms like BlackRock enforcing ESG standards that governments cannot or won’t legislate directly. This has led to accusations that ESG creates a mechanism to influence market and corporate behaviors without democratic oversight, raising widespread concerns regarding accountability and overreach.
(This article referenced reports from Reuters and the Financial Times)