BlackRock does not wish to explain

The British fiduciary BlackRock refutes information from Norwatch that they divested from a West Bank firm after pressure from Norwegian investors. But the company does not wish to precise exactly what they think is wrong in the coverage.

Norwatch wrote last week that the British fiduciary BlackRock had sold its investments which were placed in settlement construction on the West Bank.

These investments were done through the Israeli firm Africa-Israel Investments, who participate in the building of the settlement Ma’aleh Adumim (above). Through the Scandinavian banks Storebrand, Danica Pensjon and Skandiabanken, even Norwegian investors could participate in the British fund. But after the three banks made contact with BlackRock, the fiduciary has announced that they do not longer invest in the firm.

But something in this description is wrong, according to BlackRock. In the Israeli business newspaper Globes yesterday afternoon, BlackRock was quoted on saying that the information in the Norwatch coverage was “misleading”, but it is not identified exactly what in the story is misleading.

BlackRock yesterday afternoon made contact with Norwatch to give a comment to last week’s article, and to point out that there are errors in what Norwatch had written about the case.

“The allegations made are untrue, as a fiduciary, we always act in the best interests of our clients and within the applicable legal and regulatory framework and we have done so here”, Emma Phillips, Vice President Corporate Communications, wrote in an email to Norwatch.

But it is not possible to ascertain exactly what they believe is wrong. It has been confirmed that BlackRock has divested from the West Bank, and it has been confirmed that the Scandinavian banks brought up the issue with BlackRock.

Globes wrote that BlackRock denies that there are political motives behind the divestment of the Africa-Israel shares. The newspaper wrote this on the basis of the same quotes which Norwatch was given. But it is not evident that such a conclusion can be drawn based on those comments.

BlackRock has a very strict policy on not commenting on single investments. Therefore, they are not able to give further statements on what in the Norwatch coverage is untrue, or the actual reasons of the divestment.

“Which allegations are untrue in the story?”

“The allegations which are factually incorrect are those within the article that refer to our reasons behind our decision to divest our holding in the company”, Phillips answered, in what was to become a longer email exchange.

“So is it untrue that you divested as a result of the 3 mentioned Scandinavian banks taking action? Or is it untrue that you divested due to the legal-political-ethical dilemmas attached to Africa-Israel’s operations on the West Bank?”, Norwatch asked.

“Our decisions to buy or sell stocks are based on our investment process”, Phillips answered, without wishing to clarify further.

It is thus unclear whether BlackRock wishes to refute the allegation that they divested from the West Bank investments due to the ethical controversies, or whether it is untrue that they left the West Bank as as result of the Scandinavian pressure. In either way, they confirm having divested from the controversial firm.

Ethical investments

Fund managers and banks have a very different policy on how transparent they should be on the management and exclusions of unethical investments. Thereby, it is sometimes hard to know whether there are ethical – or simply financial – motives behind, when a manager terminates an investment.

BlackRock’s divestment of the Africa-Israel shares, must be seen in the light of what they themselves call the “investments process”. On BlackRock’s homepages, it is not precisely defined what is included in such a process, for instance whether the investor’s criteria for social responsible investments (SRI) are part of the package.

What is clear, is that in BlackRock’s presentation of its SRI standards , it is written that “We are not investors as principals, but as agents for our clients, and it is their values or concerns that must be used to frame the criteria against which we evaluate companies”. They thus see not only financial concerns as decisive upon investment decisions.

This is also one of BlackRock’s principles, in the same document. “When evaluating companies for investment, we will consider their social, environmental and other policies alongside other factors which we believe will affect their long-term prospects”.

The fact that ethical concerns could have been part of the evaluation when BlackRock made the divestment of Africa-Israel is thus fully in line with what BlackRock themselves have stated about their divestment decision. What BlackRock therefore could have denied, is that they terminated the investment as a result of the requests from the Scandinavian investors.

Danica Pensjon in Denmark have summarized their general experiences with BlackRocks SRI work in this manner, on their homepages:

“BlackRock has implemented principles for SRI in their investment decisions, and has a group of analytics who exclusively are working on issues related to SRI, and who carry out screenings. […] The company is in close dialogue with several firms relating to SRI, but has never excluded a firm unless a customer explicitly asks for it”, writes Danica, who themselves made contact with BlackRock regarding the Africa-Israel case.

BlackRock to become second biggest

In last week’s story, Norwatch wrote that BlackRock also had invested in Africa-Israel through Barclays Global Fund Advisors. Spokesperson Phillips explained yesterday that the divestment they have done of Africa-Israel exclusively is for the holding they had through BlackRock, and not for Barclays, a transaction which is expected to close in fourth quarter of 2009.

When Norwatch wrote that BlackRock was the second biggest shareholder in Africa-Israel, it was based on the presumption that they already had acquired Barclay. This is thus incorrect. The fact that the transaction is not completed, means that BlackRock has only been the seventh biggest shareholder, not the second biggest.

If the Barclay ownership in Africa-Israel has not changed since June this year, until the time when the BlackRock/Barclays transaction closes later this year, BlackRock will again become the a substantial shareholder of Africa-Israel: as the second biggest.

BlackRock underlines furthermore that they are not a bank, which Norwatch had erroneously written last week. BlackRock is a fiduciary.

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