Who Owns iShares?

iShares offers one of the largest suites of ESG ETFs in the industry, with over 200 ESG-focused ETFs globally. These funds apply environmental, social, and governance screening to their underlying holdings, excluding companies that fail to meet ESG criteria while maintaining broad market exposure. iShares ESG ETFs had approximately $100 billion in AUM as of 2024.

However, iShares and BlackRock have faced criticism regarding ESG implementation. Critics including academic researchers and consumer advocacy groups have argued that some iShares ESG ETFs hold companies that would not commonly be considered environmentally or socially responsible, including oil and gas companies and weapons manufacturers. This criticism is part of a broader debate about "greenwashing" in ESG investing, where funds marketed as sustainable may not deliver the environmental or social impact that investors expect.

BlackRock is a signatory to the UN Principles for Responsible Investment (PRI) and the Net Zero Asset Managers initiative. Through these commitments, BlackRock has pledged to help clients achieve net-zero emissions in their portfolios by 2050. iShares offers climate-focused ETFs that track low-carbon and climate transition indexes.

BlackRock's Investment Stewardship team votes proxies on behalf of iShares fund shareholders. The team engages with portfolio companies on governance issues including board diversity, climate risk disclosure, and executive compensation. BlackRock publishes annual stewardship reports detailing its proxy voting record and engagement activities. In 2023, BlackRock voted against director nominations at over 400 companies on climate-related concerns.

BlackRock has faced political backlash in the United States over its ESG policies. Several Republican-led states including Florida, Texas, and Missouri have divested state pension funds from BlackRock or passed laws restricting state investments with firms that "boycott" fossil fuel companies. BlackRock has responded by stating that it does not boycott fossil fuels and that it offers both ESG and non-ESG investment products to meet client preferences.

ESG Greenwashing Allegations (2022-present): iShares ESG ETFs have faced scrutiny from regulators and consumer advocates regarding the gap between ESG marketing claims and actual portfolio holdings. In 2022, the SEC proposed new rules requiring ESG funds to provide more detailed disclosures about their screening methodologies and portfolio composition. Several iShares ESG ETFs were cited in media reports as holding fossil fuel companies and defense contractors despite being marketed as sustainable. BlackRock has defended its ESG products by stating that its screening methodologies are disclosed in fund prospectuses and that ESG screening does not necessarily mean excluding entire sectors.

SEC ESG Disclosure Rule (2023): In 2023, the SEC adopted the "Names Rule" amendment, requiring funds with ESG-related names to invest at least 80 percent of assets in accordance with the ESG criteria implied by their names. BlackRock adjusted several iShares ESG ETFs to comply with the new rule, including renaming some funds and adjusting portfolio methodologies.

Republican State Divestments (2022-2024): Several Republican-led states divested public pension funds from BlackRock in protest of the company's ESG and climate policies. Florida divested $2 billion from BlackRock in late 2022. Texas passed a law restricting state investments with firms that "boycott" fossil fuel companies, which resulted in BlackRock being placed on a restricted list. Missouri, Louisiana, and Arkansas also took actions against BlackRock. These divestments represented a small fraction of BlackRock's $10 trillion AUM but generated significant media attention and political pressure.

ETF Flash Crash Concerns (2010, 2015): During the May 6, 2010 Flash Crash and the August 24, 2015 market disruption, some iShares ETFs experienced significant price dislocations, with certain funds trading at prices far below their net asset value (NAV) for brief periods. These events raised questions about ETF liquidity and market-making mechanisms during periods of extreme volatility. BlackRock and other ETF providers worked with exchanges and market makers to implement circuit breakers and other safeguards to prevent similar dislocations in the future.

Concentration and Systemic Risk Concerns: BlackRock's dominance of the ETF market through iShares has led to concerns from financial regulators and academics about concentration risk. Because iShares, Vanguard, and State Street together control approximately 80 percent of the U.S. ETF market, and because these three firms are also the largest shareholders of most U.S. public companies, concerns have been raised about the influence of passive investing on corporate governance and market stability. The Financial Stability Oversight Council (FSOC) has identified ETF growth as a potential systemic risk factor in its annual reports.