This is the first in a four-part series of posts that introduces and maps out some key features of the power structures of major financiers of climate chaos and injustice. This post examines the power and influence of asset managers and their extensive control, through massive shareholding, of the fossil fuel industry.
Over the past few years, climate and environmental justice organizers have increasingly focused on a small but powerful group of financial actors who finance and control the bulk of fossil fuel operations driving climate chaos.
In this, one kind of financial actor has arguably stood out above the others: asset managers, especially the largest ones, like BlackRock, Vanguard, State Street, and Fidelity. Activists around the world have honed in on the central role that asset managers play in bankrolling fossil fuels and deforestation and driving environmental racism against frontline communities.
Why the focus on asset managers? Because, as top investors in nearly every industry, these firms hold the levers of control over the corporations that are spewing the bulk of the world’s carbon emissions. As we show below, from ExxonMobil to Chevron, ConocoPhillips to Marathon Petroleum, asset managers are far and away the top shareholders of many of the world’s biggest fossil fuel corporations.
What are asset managers, and why do they matter?
Asset management firms manage the wealth of their clients and try to grow that wealth through investments. These clients include pension funds, university endowments, and individual investors. They pay asset managers a fee to invest their money into things like stocks and bonds and hopefully get back more money than they originally invested.
In other words, asset managers are sort of like middle men: they take their clients’ money and then invest and manage that money on their clients’ behalf – pocketing a fee in the process. Today, asset management is a huge business, with $126 trillion assets under management globally in 2022, according to McKinsey.
For a long time, asset management firms relied on analysts to discover better-than-average investment opportunities. But over the past two decades, their business has centered evermore on the rise of so-called “passive” index funds.
These index funds track stock and bond indexes for specific sectors. They are sometimes referred to as “passive” because, rather than trying to actively connive to beat the market, they essentially anchor their returns to the overall average of the stock and bond markets or a designated subset or combination of either.
In other words, by investing in, say, a fund managed by an asset management firm that is indexed to the S&P 500, the money you invest in that fund will be spread out across investments in the shares of hundreds of companies, with the idea that you’re minimizing investment risk with the hope of steady returns.
This means that asset managers aren’t like most other businesses. While most corporations focus on a specific sector – say, book publishing, candy production, or semiconductors – asset managers are widely invested in virtually every industry, giving them control over vast swaths of the economy. And while index funds are central for asset managers, they also have private equity arms and other branches of business.
While there are hundreds of asset management firms, the industry has become deeply concentrated over the past few decades. Just a handful of firms like BlackRock, Vanguard, State Street, and Fidelity dominate the industry.
The biggest asset managers are the top shareholders of most major publicly-traded corporations. In 2020, the “Big Three” asset managers – BlackRock, Vanguard, and State Street – were, when combined, the largest shareholder in an astounding 88 percent of firms in the S&P 500.
For example, let’s look at the top shareholders of Pioneer Natural Resources, one of the top oil drillers in Texas. According to its most recent proxy statement from 2022, Pioneer’s top three shareholders are Vanguard (10.2%), BlackRock (7.4%), and State Street (6.1%), followed by two other big asset managers, Capital Group (5.9%) and Wellington Management (5.1%). Taken together, these five asset managers control a whopping 34.7% of Pioneer stock.
Even the most omnipresent and powerful corporate actors, such as the big banks, are actually held by the big asset managers. The two top beneficial owners of JPMorgan Chase, the biggest US bank, are Vanguard (8.8%) and BlackRock (6.5%).
The huge shareholding stake that the large asset managers have in corporations across the entire economic system makes these firms crucial centers of power and control within the capitalist system. As one scholar suggested, with only minor exaggeration, “the biggest asset managers do not own a selection of shares so much as a share of capital in its entirety.” Another scholar has gone so far to label today’s system as “asset manager capitalism” marked by the concentration of stock ownership among a small group of large asset managers who have significant “control-based power” over corporations.
The asset manager power structure
Like other corporate actors, asset managers have powerful networks and extensive influence operations, such as massive armies of lobbyists and revolving door connections, to protect their interests, which center on growing their assets under management and avoiding or minimizing regulation.
As an industry, asset managers have lobbying and advocacy groups working to defend their broader interests. The Investment Company Institute (ICI) is one of the most prominent examples. The ICI describes itself as “the leading association representing regulated investment funds” with a “mission is to strengthen the foundation of the asset management industry for the ultimate benefit of the long-term individual investor.”
The ICI’s Board of Governors includes representatives from the industry’s major players, and many of its day-to-day leaders had previous jobs with US financial regulators. For example, ICI President and CEO Eric J. Pan held top positions in the US Commodity Futures Trading Commission and the US Securities and Exchange Commission over the past decade, while Chief Government Affairs Officer, John Emling, worked in the George W. Bush administration.
The ICI has a massive federal lobbying operation. It spent over $5 million on federal lobbying in 2022 alone, hiring over a dozen lobbying firms alongside its in-house lobbying efforts.
Asset management firms also have large in-house and hired lobbying teams. BlackRock spent $2.38 million on federal lobbying in 2022 – a 63% from the previous year. Fidelity spent $2.4 million, State Street spent $1.76 million, and Vanguard spent $1.82 million on federal lobbying in 2022
But the influence of asset managers may best be gauged by mapping out the industry’s most powerful player: BlackRock, which has $8.59 trillion in assets under management.
BlackRock is deeply interlocked with the Biden administration. For example, BlackRock’s former Global Head of Sustainable Investing, Brian Deese, now serves as the Director of the National Economic Council and, in this capacity, as Biden’s top economic advisor. Wally Adeyemo, who served as a BlackRock senior advisor and as chief of staff to BlackRock CEO Larry Fink, is Deputy Secretary of the Treasury. Michael Pyle, BlackRock’s former chief investment strategist, is Kamala Harris’s Chief Economic Advisor.
Moreover, the chair of the BlackRock Investment Institute – the firm’s global in-house think tank – is Thomas Donilon. Thomas’s brother, Mike Donilon, is a senior advisor to Biden and was chief strategist during his 2020 presidential campaign. Thomas Donilon’s wife, Catherine Russell, served as Assistant to the President and Director of the White House Office of Presidential Personnel under Biden from 2020 to 2022.
The revolving door also swings the other way. For example, Dalia Blass, who led the Division of Investment Management in the U.S. Securities & Exchange Commission until 2021, now serves as BlackRock’s Head of External Affairs and serves on its Global Executive Committee.
The Trump and Biden administrations leaned heavily on BlackRock in 2020 to devise a response to the economic crisis spurred by the onset of the COVID-19 pandemic. The Federal Reserve tapped BlackRock to oversee the purchase of billions of dollars worth of corporate bonds as part of its emergency response to that crisis.
With all this, Bloomberg went so far as to suggest that BlackRock might be the “fourth branch” of the U.S. government. Its reach is global as well. For example, President Volodymyr Zelenskyy recently announced that BlackRock will coordinate investment in rebuilding Ukraine. Blackrock is also partnering with the Saudi Public Investment Fund, one of the biggest sovereign wealth funds in the world.
The entrenchment of asset managers within the wider corporate power structure across sectors is also seen through their board ties. BlackRock’s directors, for example, have past and current ties to corporate giants like BP, General Electric, Verizon, Cisco Systems, Estée Lauder, and many more, some of which BlackRock is a top shareholders. As we’ve reported, BlackRock’s lead independent director Murray Gerber helped drive the rise of the US fracking boom as the head of EQT and has raked in millions as a board director of US Steel and Halliburton, the oilfield services giant.
BlackRock Chairman and CEO Larry Fink is one of the most powerful corporate leaders in the world and “the undisputed king of Wall Street,” according to the Financial Times. Fink is a billionaire with a network that stretches across that entire corporate and social power structure. He is the vice-chair of the NYU Board of Trustees, a trustee of the Museum of Modern Art, an executive committee member of the Partnership for New York City, a director on the Council of Foreign Relations (the corporate-dominated think tank that influences US foreign policy), among other ties. He was a director of the Nature Conservancy until 2019, and he has served as the co-chair of the New York City Police Foundation’s annual gala multiple times. Rumors flew that Fink was being considered for Treasury Secretary if Hillary Clinton had won the 2016 presidential election.
While Fink is exceptionally influential, other asset manager CEOs are also extremely powerful and well-connected. Fidelity Investments CEO Abigail Johnson is the richest person in Massachusetts, with a net worth of over $21 billion. Jay Hooley, who was States Street’s CEO and Chairman until 2019, is a director of insurance giant Liberty Mutual and lead independent director of ExxonMobil. Morgan Stanley CEO James Gorman chairs the Board of Overseers of the Columbia Business School, is a director on the Council of Foreign Relations, and is a member of key elite institutions like the Business Council and the Business Roundtable. He’s also a former director of the Federal Reserve Bank of New York and the co-chairman of the Metropolitan Museum of Art’s business committee.
Asset managers and the climate crisis
Climate advocates have focused on asset managers for an obvious reason: these firms are top shareholders of the world’s fossil fuel corporations whose operations generate a huge chunk of the carbon emissions driving climate catastrophe and environmental injustice.
A September 2022 study titled “Ten financial actors can accelerate a transition away from fossil fuels” examined the world’s shareholders with the most centrality within the “structures of ownership in the fossil fuel industry” and therefore the greatest “potential to enable a low-carbon transition.” The two most powerful owners, by far, were BlackRock and Vanguard. State Street was number four. Overall, ten of the top twenty firms listed were US-based asset managers (Dimensional Fund Advisors, #6; Fidelity Investments, #9; Capital Group, #10; Bank of New York Mellon, #11; JPMorgan Chase, #12; Citigroup, #16; Geode Capital, #20).
The study was unequivocal in stating that these asset managers “have the potential to influence the strategic direction and governance” of the fossil fuel companies they hold and that they “should consequently be held accountable for financing the economic activities that contribute to climate instability.” This accountability has yet to happen, with powerful asset managers backtracking on climate pledges and outright refusing to ramp up pressure on polluters. Even BlackRock’s own former CIO of Sustainable Investing said the industry’s climate gestures are “duping the American public” and amount to little more than greenwashing.
To see a more granular example of the big asset managers interlocking ownership of the major centers of fossil fuel production, just look at a few huge US oil majors and refiners. BlackRock, Vanguard, and State Street, taken together, are by far the top shareholders of Chevron (22.19%), ExxonMobil (20.6%), ConocoPhillips (21.84%), Marathon Petroleum (27.9%), and Phillips 66 (21.38%) – all among the very biggest oil and gas producers and refiners.
Fidelity Investments is also a major shareholder of fossil fuel companies, with a 13.33% stake in Hess Corporation and a 6.2% stake in EQT, for example. As LittleSis has reported, the Johnson family also personally owns a major Texas top oil and gas driller, Discovery Natural Resources.
As top owners, these firms hold the levers of power and influence over fossil fuel companies – if they decide to use it. It’s also worth noting that, while asset managers oversee investments and the control that comes with them, they don’t own most of the underlying assets they manage, which come from things like retirement funds, college and foundation endowments, and regular people, all who are the industry’s clients. Because asset managers are so broadly invested in the system as a whole, they’re also susceptible to political pressure and policy changes. All this creates different leverage points for activists, and it’s all the more reason for organizers to try to deploy an array of tactics to hold asset managers to account as one strategy within a larger, global, multi-pronged movement for climate justice.
Organizers have engaged in a range of efforts over the past several years. Campaigns like BlackRock’s Big Problem and Vanguard S.O.S., backed by around two dozen organizations and coalitions, have kept the pressure up demanding that the big asset managers ditch climate-harming companies, use their shareholder power to push companies to decarbonize, support human and Indigenous rights, and integrate climate justice into investment decisions. They’ve held peoples’ assemblies with organizers and elected officials such as Rep. Rashida Tlaib. A range of coalitions and groups have staged protests and direct actions at asset manager headquarters. Frontline organizers have called on the big asset managers to make concrete steps towards respecting Indigenous rights and stopping deforestation. A wide array of stakeholders are also involved in ongoing efforts on this inside to hold big asset managers to account in wielding their immense shareholding control towards decarbonization. Projects like Fossil Free Funds offer data to the public that shows the investments of asset manager index funds, so you can search the extent to which your retirement fund or your university endowment is invested in oil, gas and coal companies.
While there is still a very long way to go, these efforts by organizers and campaigners have had a significant impact in changing the terms of debate around the climate responsibility of asset managers. A decade ago, this was not something widely discussed; today, there are news stories on it almost daily and every asset manager is compelled to address this issue.
Asset managers are absolutely central players in the wider capitalist system who plunge billions upon billions of our dollars into corporations that are destroying our world. They need to continue to be challenged and held to account – and their business model of profiteering through investing in industries that cause harm to our communities need to ultimately be dismantled.
Research tip: If you want to find out what asset managers own different publicly-traded corporations, just search the corporation’s name plus “investor relations” and look for the most recent “proxy statement,” also called the SCHEDULE 14A or DEF 14A. Then hit Ctrl + F on your keyboard and search for “beneficial owners.” You’ll find a table, usually toward the end of the document, that lists the top shareholders.