OPINION

The 'BlackRock exemption' has no place in the EU's due diligence directive

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  Protesters at the Youth Led Climate Strike. (Photo: Peg Hunter)

By MYRIAM VANDER STICHELE & JOSEPH WILDE-RAMSING

AMSTERDAM, 8. JUN, 2023

Thursday (8 June) marks the start of the trilogues to finalise the European Corporate Sustainability Due Diligence Directive (CSDDD).

The CSDDD is Europe's attempt to compel EU-based companies to prevent, address and remedy environmental or human rights risks and adverse impacts in their global value chains. The stakes are high, as the negotiations between officials from the European Commission, the Council, and the Parliament kick off.

One of the most contentious issues up for debate is whether and how the law will cover asset managers and institutional investors.

The parliament's negotiation mandate includes these investors, as defined in Article 2 (e-f) in the Shareholders Rights Directive (SRD II), while the council and the commission afford investors significant derogations from key provisions.

These derogations have become known by insiders as the 'BlackRock exemption', after reports of heavy lobbying by the world's largest asset manager to be exempted from the CSDDD obligations.

However, letting the influential asset management industry, estimated to manage €28 trillion in Europe, off the hook would have severe consequences on the overall effectiveness of how other companies implement their due diligence under the CSDDD to avoid adverse impacts on human rights and the environment, a thorny issue in global value chains.

Influential actors

Asset managers and institutional investors exercise considerable influence over investee companies' strategy, actions, and financing of due diligence and sustainability efforts through various avenues.

Large asset managers and institutional investors are often the top shareholders in publicly-traded companies. They are the primary beneficiary of the dividends and share buybacks of these companies.

Research has exposed how an increasing part of corporate income and profits is transferred to shareholders through dividends and share buybacks, often at the expense of fair remuneration of workers (in the supply chain), research and development, climate transition plans (see Shell example below), and spending on due diligence to avoid negative impacts on people and planet.

This results from asset managers and institutional investors using their significant shareholder voting power to pressure investee companies to focus on maximising short-term shareholder value rather than on the longer-term interests of other stakeholders, which the commission itself has identified as problematic.

In addition to flexing their voting muscle at shareholder meetings, large asset managers and institutional investors influence company strategies and actions by engaging with the investee company's management behind closed doors. While they should be transparent about whether they integrate a long-term perspective in their engagement, according to SRD II, the EC did not yet report whether that is the case, as required by 10 June 2022.

Asset managers also have voting and engagement power by creating various investment funds that combine shares of up to hundreds of companies. An increasing part of these "passive investment" funds simply track the shares' stock market value without any due diligence, blindly following earnings without taking into account the impact they are having on people and the planet.

Asset managers have attracted enormous amounts of investment to their passive investment funds from retail investors who are not interested or informed about how fund managers vote on their behalf at companies' AGMs, resulting in lack of scrutiny and due diligence in the invested companies.

Such lack of scrutiny also happens for 'fixed income funds' that combine corporate bonds. The EU regulates most investment funds via the Directive on Undertakings in Collective Investments in Transferable Securities (UCITS), which the European Parliament proposes to exclude from coverage by the CSDDD, leaving a legal loophole that must be addressed.

Large asset managers like BlackRock also invest and manage assets on behalf of pension funds and smaller institutional investors, who often do not scrutinise how their asset manager is voting or using their assets to finance companies through bonds.

In addition, BlackRock's vast high-tech platform, Aladdin, to manage risks, advise on portfolio holdings and link investors to the world's financial markets, is estimated to cover at least 10% of globally traded shares and bonds. Whether or not Aladdin is legally obligated to integrate environmental and social impacts of companies will have an enormous influence on how investors behave.

Undermining the energy transition

Investor influence can be illustrated by what is happening in the oil industry. In February 2023, BP's share value rose by 10% following its announcement to reduce its climate ambitions. Since, Shell's management declared that renewables are not profitable enough. It blatantly stated at Shell's 2023 AGM that more oil and gas investments were needed to provide more "competitive" shareholder value. Shell's CEO Sawan's primary concern is that the total value of Shell's shares traded on stock exchanges is almost half of that of its US rivals Exxon and Chevron, notwithstanding having returned US$ 26 billion to its shareholders in 2022.

During their engagement before the AGM, a "growing number of major investors" reportedly pressed Shell to focus on higher financial returns "rather than energy transition plans".

BlackRock (10.6%) and Vanguard (3.4%) are Shell's largest shareholders. 80% of the shareholders voted in favour of Shell's current minimal actions to advance the energy transition and against a shareholder resolution urging for swifter actions.

This will influence Shell's future strategy and investment plans, including not implementing a Dutch court ruling that ordered it to reduce its climate-harming emissions by 45% by 2030 compared to 2019.

Long 'value' chains not sufficiently defined

Most asset managers and institutional investors own less than 1% of the shares of the many listed companies in which they invest as a standard strategy to reduce the risk of financial losses. These investors seldom do self-scrutiny and due diligence regarding AGM voting, preferring to rely on advisory firms instead. The proxy vote advisory business is dominated by two US firms: Institutional Shareholder Services (ISS) and Glass-Lewis. The proxy vote advisory firms can ultimately have a huge influence on companies' behaviour but are not explicitly covered by CSDDD.

The 'value' chain continues, with asset managers satisfying their shareholders with high dividends and share buy-backs. BlackRock returned US$4.9 billion to its shareholders in 2022, including $1.9 billion in share buybacks. And the largest shareholders of BlackRock are…big reveal…Vanguard (9%) and BlackRock (7%) itself.

BlackRock recommended its own shareholders to vote against resolutions to disclose whether BlackRock can engineer decarbonisation and its investment has social and environmental impacts. Asset managers have vehemently opposed the CSDDD to avoid lost profits from the costs of finally undertaking due diligence related to the myriad of companies whose shares and bonds they manage or advise on.

An opportunity that shouldn't be missed

With the CSDDD, there is an opportunity to harness the power of investment for truly sustainable activities. But to do this, the CSDDD must not allow the "BlackRock exemption" and instead cover institutional investors and asset managers to avoid that their various channels of influence drive company decisions in the other direction.

It is only by obliging all financial and non-financial companies to invest in due diligence that prevents, avoids and remediates negative social and environmental impacts that the CSDDD can be effective.

AUTHOR BIO

Myriam Vander Stichele is a senior researcher at SOMO and an expert on the financial sector.

Joseph Wilde-Ramsing is director of advocacy at SOMO and an expert on due diligence.

EU's Nature Restoration Law: more funds, better agriculture

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  One particular European People's Party (EPP) MEP swore to 'shoot down' the Nature Restoration legislation — but the EPP have instead only shot themselves in the foot (Photo: The Left)

By MICK WALLACE

BRUSSELS, TODAY, 
"The world appears to be entering its sixth mass extinction period brought about entirely by humans...The time to recognise this phenomenon as occurring has already passed... And now is the pivotal time to protect the future integrity of biodiversity, and thereby the persistence of humanity".

"The persistence of humanity". Let that sink in.

This is not a new Netflix series, but a recent study published in the Biological Reviews journal. The authors — scientists from Queens's University Belfast — determined that almost half of all the earth's species are currently in decline.

According to the UN, up to one million of the estimated eight million plant and animal species on Earth are at risk of extinction — many of them within decades.

In Europe, the European Commission estimates that more than 80 percent of habitats are in "poor" condition.

EPP 'disinformation rampage'

It is well known at this stage that the European People's Party (EPP) is on a disinformation rampage targeting the Nature Restoration Law. They are spewing dangerous propaganda about one of the most important pieces of legislation that has ever come before the European Parliament. But their disinformation campaign is backfiring and has now become counterproductive.

There are only so many times you can repeat a lie and have it exposed before people stop believing you. Their outrageous misrepresentations of this law have been repeatedly debunked — by the European Commission, by scientists, and even by business and industry.

The EPP's most recent humiliation in terms of its disinformation campaign happened this week when WindEurope emphatically welcomed the regulation, not for the first time, and put to bed any notion that the Nature Restoration Law would hamper the roll out of renewable energy.

The EPP have repeatedly insisted that the Nature Restoration Law would undermine our ability to meet our renewable energy targets. Yet, WindEurope couldn't be any clearer: EPP is "fundamentally wrong" they said.

One particular EPP MEP swore to "shoot down" this legislation, but EPP have instead only shot themselves in the foot.

As EPP slips into bed with the far-right in a more formal alliance this time, we see them adopting the same hysteria tactics we are more accustomed to with neo-fascists.

Let's be honest with ourselves — no one is coming for your children. The Nature Restoration Law is not about taking things from people or holding us back. The EPP would have you think that this law is about forcing people to do work they don't want to do, and suffering economically for it.

The opposite is true. It's actually about new opportunities, and the viability of our livelihoods as we know them. It will set the legal framework for biodiversity, which will open a myriad of new opportunities for people, including farmers.

A major addition to the draft law that the European Parliament's environment committee's rapporteur and shadow rapporteurs, myself included, have agreed to, is a new chapter on funding.

This chapter opens the door for new and predictable finance streams, for those who choose to trail blaze. A key part of this new chapter is the potential for a new permanent, dedicated nature restoration fund within the MFF — fresh money for those that lead the way in nature restoration efforts. This would be totally separate from the Common Agricultural Policy (CAP). Why are EPP, who claim to be taking the side of the farmers', opposing this new opportunity for farmers to get new, additional money?

There is also huge potential for leveraging private and joint public and private investments in relation to the Nature Restoration Law, for example through the EU taxonomy, and the Business for Biodiversity movement.

The commission is already working with the European Investment Bank and other implementing partners through the InvestEU programme and the GreenAssist initiative to build a pipeline of green investments and scale up public/private blended finance for nature restoration. The new 'Guidelines on State aid for Climate, Environmental Protection and Energy' also offer significant funding possibilities.

If EPP wants to see farmers supported and financially incentivised to restore nature, then they should support the Nature Restoration Law.

No one will be forced to do anything with this law.

This is about just transition, and those who decide themselves to lead the way will be rewarded. The uptake of measures will have to be made attractive by each national government.

There is an explicit obligation on member states to do so when it comes to restoring drained peatlands. Each member state will detail in their own nature restoration plans what they are planning to do — where, when, how and what they will restore, and public participation is built into the very core of this planning mechanism.

Compensation schemes are also explicitly part of this process. Those who choose to fully rewet their land, for example, deserve to have this option for financial compensation. We cannot allow EPP to tank this ship of new opportunities.

AUTHOR BIO

Mike Wallace is an Irish MEP for The Left, who was a shadow rapporteur on the EU Nature Restoration Law on behalf of the European Parliament.

SINGAPORE

MOM probes social enterprise Red Crowns for potentially flouting the law in hiring foreign maids

MOM’s investigations into Red Crowns Senior Living go as far back as November 2021. 

PHOTO: ST FILE

Judith Tan
Correspondent

ST

June 14,2023

SINGAPORE - The Ministry of Manpower (MOM) is probing social enterprise Red Crowns Senior Living (RCSL) for potentially flouting the Employment of Foreign Manpower Act.

Posting on its Facebook page, the ministry said it has “serious concerns about RCSL’s operating model as it could compromise the interests of its elderly clients and well-being of the migrant domestic workers (MDWs)”.

Under its model of assisted co-living, RCSL matches four seniors to an apartment, who are then taken care of by two foreign domestic workers (FDWs). These workers are usually new hires under two of the clients in the apartment.


But under the law, the employer of a foreign maid is responsible for her food, safety, medical care, job scope, accommodation and rest arrangements. Yet MOM was informed that while the domestic workers are employed by the elderly clients, these employers do not actually have full control over all the areas of their employment.

“Notably, some of RCSL’s clients had indicated to MOM that they were unaware of their legal liabilities as employers, such as being responsible if MDWs sustained a work-related injury or failed to receive timely salary payment(s),” a spokesman for MOM told ST.

MOM’s investigations into RCSL go as far back as November 2021.

RCSL was set up in 2021 by architect Joshua Goh, 43, who saw the growing demand for assisted living facilities besides nursing care facilities, which are more appropriate for seniors who are ill and need more care than relatively healthy older people.

Mr Goh himself had trouble finding quality residential care services for his father.

The enterprise currently rents 30 Housing Board (HDB) flats and three apartments in condominiums for co-living.

Prices start at $2,900 a month for a two-bedder room in an HDB flat, inclusive of meals, utilities and 24-hour caregiving. The cost can go up to $6,300 a month for a condominium room, according to RCSL’s website.


Businessman Ahravin Sandraregaran, 34, whose 69-year-old father moved into the RCSL Hillview facility a year ago, was approached by MOM.

“One foreign domestic helper in the condo was hired by my father and I am the sponsor,” said Mr Ahravin.

Mr Ahravin said he has had no issues with the arrangements so far.

“With the rising costs of caring for an aged parent, this is the best solution. My father has companions around his age, and the maid has emotional support from the other maid. That was what I told the officers,” he said.

Agreeing, accountant Christopher Tan, 51, said: “This model is also safer than having my mother alone at home with just the foreign help.”

His 76-year-old mother suffered a stroke 12 years ago and is wheelchair-bound.

Mr Tan, who was also approached by MOM, added: “The maids here cook and clean for the seniors and are not deployed to other places. The seniors also get to age in place. They go out, shop for groceries and spend the weekend with families when the maids enjoy their days off,” he said.

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Employers to provide medical insurance coverage of at least $60k for maids, migrant workers from July

But the authorities are concerned if such an unusual model for elder care has breached regulations, said labour law experts.

The head of employment and labour at TSMP Law Corp, Mr Ian Lim, told ST in a nursing home, for example, the home itself is the employer of all the help staff in the facility and not any of the residents.

“In this case, the elderly clients are the employers, which is uncommon in a centralised setting. Also, should the elderly employers be of very advanced age or suffering from dementia, would they be able to even appreciate the fact that they are the employers of these helps?” he asked.

Mr Lim said under the statute, a foreign maid may work for one household only.

“At the RCSL homes, the FDWs are looking after a group of elderly who may be unrelated but living under one roof for economies of scale. That is perhaps the concern. The statute never contemplates such a group of people living together for convenience and companionship,” he added.

When contacted, Mr Goh said RCSL is “given the authority by, and work closely with, the elderly and their families to choose and hire the MDWs, who are employed on better than market terms and work with the employers at the specified residence”.

He said: “Our mission is to provide quality, affordable cares to seniors who prefer to age-in-place in a homely environment, and we believe we are in compliance with all laws and regulations in all material respect.”

He said neither the clients nor the workers face unnecessary risks as there is a household of four seniors and two domestic workers “looking out for each other”.

“Our coordinators also visit the homes weekly to make sure everyone is fine. Family members are kept up to date and have direct communication with the help via WhatsApp. We are also putting in place incentives and training for the MDWs to help them improve themselves in their skills and encourage them to take initiatives,” he said.

Mr Goh said he is in discussions with the MOM and would work with it to resolve their concerns.

MOM said investigations are still ongoing to establish the scale of RCSL’s operations and potential employment-related offences.

“MOM is engaging the elderly clients, their next-of-kin, and the MDWs to provide our assistance. Our focus is on helping the elderly clients understand their responsibilities as employers of MDWs, and minimising disruptions to their care arrangements,” a spokesman for MOM said.

 

IDF cyberdefense system, three other top secret projects awarded top security prize

Gallant says classified ventures send ‘clear message to our adversaries’; officer receiving award says his team developed tools to deal with ‘the most advanced’ cyberattackers

By EMANUEL FABIAN 13 June 2023, 5:38 pm  

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President Isaac Herzog (2R) awards a Navy officer with the Israel Defense Prize, alongside IDF chief Herzi Halevi (right) and Defense Minister Yoav Gallant (center), June 13, 2023. (Defense Ministry)

President Isaac Herzog and Defense Minister Yoav Gallant on Tuesday awarded the Israel Defense Prize, one of the highest honors bestowed by the state, to four teams for top secret work they accomplished over the past year.

The winners, announced last month, included an army team behind a “groundbreaking” cyberdefense system aimed at giving Israel “freedom of action in the digital space,” and three other completely classified projects led by various security organizations, according to the Defense Ministry.

The ceremony took place at Herzog’s residence in Jerusalem, with military chief Lt. Gen. Herzi Halevi, Shin Bet head Ronen Bar, Mossad chief David Barnea, and Defense Ministry Director General Maj. Gen. (res.) Eyal Zamir in attendance.

“Officers, soldiers, and fellow citizens, the women and men of our esteemed defense establishment — your invaluable contributions to Israel’s national strength are truly remarkable. Through your accomplishments, inventions, developments, and outstanding achievements, the security of our beloved nation is safeguarded, ensuring our ability to defend ourselves independently,” said Herzog.

Gallant said the classified projects “send a clear message to our adversaries that we are always prepared for any threat.”

The Israel Defense Prize award, which is named for the commander of Israel’s pre-state Hagana militia Eliyahu Golomb, is presented each year to people and projects deemed to have made a significant contribution to the country’s security.

President Isaac Herzog (right) stands with Mossad chief David Barnea (left) in front of members of various security organizations awarded the Israel Defense Prize, at the President’s Residence in Jerusalem, June 13, 2023. (Defense Ministry)

The development of the cyberdefense system was led by the so-called Spectrum Division in the Israel Defense Force’s Computer Service Directorate, which is tasked with the defense of the electromagnetic spectrum, or radio waves. The development and deployment of the system also involved the Air Force, Military Intelligence and Navy.

“The cyber-dimension is abuzz, even when silence prevails in the physical dimensions. States, armies, criminal organizations, and terror groups clash with each other all the time. Cyber​​defense is a fascinating field with great complexity; the defender has to block all breaches, while the attacker only needs one loophole to succeed,” said Lt. Col. “Aleph,” a senior officer in the Spectrum Division, who can only be identified by his first initial in Hebrew due to security concerns.

“However, when you understand the laws of the dimension, it is possible to turn the attacker’s advantage into a disadvantage. In the project… we were able to create concepts and tools to deal with the most advanced attackers, through research and development that lasted for years and in which we reached global breakthroughs in the field,” the officer said after receiving the prize.

The Defense Ministry said the “unique” system makes “groundbreaking use of the world’s most advanced technologies in order to guarantee the IDF security and freedom of action in the digital space, in the face of advanced and developing cyberthreats.”

Illustrative. An IDF soldier from the C4I Corps types on a computer. (Israel Defense Forces)

The other three projects that won the prize this year remain largely classified.

One was a joint effort by the Shin Bet security agency and Military Intelligence’s Unit 8200. The ministry said the goal of the project was “the development and implementation of a unique technological system that enables intelligence and security superiority in many sectors.”

“The system is groundbreaking and has a significant contribution to the intelligence community’s efforts in the face of security challenges,” it added.

Another project was a joint effort between the Mossad spy agency and Unit 8200, which has a “significant and unique strategic contribution to the security of the country, embodying within it technological innovation and groundbreaking and extraordinary operational courage,” the ministry said.

The last was a project that involved Military Intelligence’s Special Operations Division, along with the Air Force, Navy, Israel Aerospace Industries and Rafael defense firms.

The ministry said that project was “an extraordinary technological solution that led to a breakthrough in operational capability… that directly contributes to maintaining the qualitative advantage of the IDF and the security of the State of Israel.”

“The project combines a number of innovative and unique technological developments made possible by the vision, determination and creativity of all project partners,” the ministry added.

Soldiers of the IDF Intelligence Unit attend a ceremony for the appointment of the new chief of Intelligence at Glilot military base, near Tel Aviv, March 28, 2018. (Miriam Alster/Flash90)

“The Military Intelligence Directorate is all over the field and achieves a unique intelligence superiority with all the means at its disposal, thanks to the people who dedicate their lives to this challenging work,” said a senior officer in the IDF Military Intelligence Directorate, who cannot be named due to security concerns.

Last year’s winners included Israel’s Ofek spy satellites. The others were also mostly classified. Among the winners in 2019 were the Mossad agents behind the operation to steal Iran’s nuclear archive the year before.

The prize has been awarded annually by the president since 1958. Though the prize is sometimes given for lifetime achievement, generally the recipients are responsible for the creation of a new piece of technology or a specific operation.

Over the years, the prize has been awarded both to individuals, like Uzi Gal who received the first Israel Defense Prize in 1958 for creating the Uzi submachine gun, and to entire teams, like the group responsible for the development of the TROPHY anti-missile system that protects Israeli tanks and armored personnel carriers, which won in 2014.

Three Tunisian opposition leaders on hunger strike in prison

Ennahdha party leaders stop eating to protest against their imprisonment on terrorism, money-laundering charges.
Ennahdha party MP Sahbi Atig, centre, demonstrates against President Kais Saied's suspension of parliament and dismissal of the prime minister on July 26, 2021 [Jdidi Wassim/SOPA Images/LightRocket via Getty Images]
Published On 13 Jun 202313 Jun 2023



Three leaders of Tunisia’s opposition Ennahdha party are on hunger strike in protest against their detention and stripping of fundamental rights in what is widely seen as part of a government crackdown against opponents of President Kais Saied.

Sahbi Atig, 64, has been on hunger strike for 32 days. His health has deteriorated severely, his wife, Zeineb Mraihi, said on Monday after visiting him in prison.

Atig, a member of Ennahdha’s Shura Council, was arrested on May 6 as he was on his way to attend a conference in Turkey. He has been held since on “suspicion of money laundering”.

“He has lost 17kg [37lbs], his heart rhythm is weak and he can hardly speak,” Mraihi said, adding that Atig spent several days in intensive care at a hospital a week ago.

‘Dangerous policy’

Ennahdha issued a statement on Monday after another of its leaders, Ahmed Mechergui, 54, a former member of parliament and chief of staff of the party’s leader, began a hunger strike on Sunday to protest against his incarceration since April 18.

“Forcing detainees to go on hunger strikes as a last resort to defend themselves is a dangerous policy and a great risk to the lives of Tunisians whose only fault is their disagreement with the ruling authorities,” the statement read.

It also made reference to the detention of activist and Ennahdha Shura member Youssef Nouri, who was arrested about the same time as Mechergui. Nouri has been on hunger strike since April 24 to “protest the lack of the most basic and fundamental of prisoner’s rights”, his lawyer Latifa Habbechi said on the first day of his strike.

On Saturday, Ennahdha published a petition by 52 Tunisian law professors calling on the government to release “all political detainees and prisoners of conscience who were imprisoned without justification or a fair trial”.

In March, the European Parliament, in a non-binding resolution, decried the “authoritarian drift” of Saied, who said those detained are “terrorists” involved in a “conspiracy against state security”.

The Ennahdha party was the largest in parliament before Saied dissolved the chamber in July 2021 as part of a power grab allowing him to rule by decree in the only democracy to emerge from the Arab Spring uprisings more than a decade ago.

A Tunisian court last month handed Ennahdha leader Rached Ghannouchi a one-year prison sentence on terrorism-related charges, which the party condemned as an “unjust political verdict”.

Ghannouchi and Atig are among more than 20 of Saied’s political opponents and personalities arrested since February, including former ministers and business figures.

SOURCE: AL JAZEERA AND NEWS AGENCIES

China attaches great importance to Palestinian issue, supports peace talks - Foreign Minister

Reuters

June 13, 2023

Chinese Foreign Minister Qin Gang attends a press conference after talks with his Dutch counterpart Wopke Hoekstra in Beijing, China, May 23, 2023. 

REUTERS/Thomas Peter/Pool


BEIJING, June 13 (Reuters) - China's Foreign Minister Qin Gang told his Palestinian counterpart that China attaches great importance to the Palestinian issue and will continue to support peace talks during a meeting in Beijing on Tuesday, according to a statement from his ministry.

China has always firmly supported the just cause of the Palestinian people to restore their legitimate rights and can contribute "Chinese wisdom," Qin is reported as having said.