Larry Fink Says We Need to Work With, Not Against Hydrocarbon Companies. But Can We Trust Them Given Their History?

At the Green Horizon Summit at COP26—aka the 26th United Nations (UN) Climate Change Conference of the Parties—BlackRock CEO Larry Fink told the press that “if we are not working with the hydrocarbon companies together, we will never get to net-zero.” Currently, about half the world’s emissions come from oil and gas companies, according to the nonprofit CDP.

And the oil and gas industries have contributed significantly to the scientific literature on climate change. ExxonMobil scientists were among the first to discover that the oil industry was contributing to climate change through the emission of greenhouse gasses back in 1977.

The company launched further research into the issue shortly after that report, developing a deep understanding of the issue long before the public was fully aware of the situation. However, despite extensive data from the company’s own scientists, ExxonMobil CEO Lee Raymond frequently made statements questioning the basic science of climate change. Raymond also actively advocated against decreasing emissions at the World Petroleum Congress in 1997. Given this track record, this leaves many in the energy sector wondering if the major hydrocarbon companies can be trusted.

But speaking at the panel in Glasgow, Fink was adamant that collaboration would work, arguing that decreasing oil and gas production in Western countries would only lead to Gulf countries increasing their production, leaving global emissions in the same position, if not worse than they were previously. “The key for our hydrocarbon companies is that they need to move to a more decarbonized business model,” he said.

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Fink said it was essential for private hydrocarbon companies and the public sector to collaborate to innovate new technologies that will ultimately help solve climate change, declaring that “capitalism works with good public policy.”

Fink’s strategy of working with, and not against, these companies is common among institutional investors. The New York State Common Retirement Fund and the New York State Teachers’ Retirement System (NYSTRS) are among the largest investors in fossil fuels in the United States. The funds have approximately $428 million and $296 million invested in ExxonMobil, respectively.

However, the $226 billion New York State Common Retirement Fund has pledged to transition its investment portfolio to reach net-zero greenhouse gas emissions by 2040. And New York state legislators introduced a bill earlier this year that would require the state teachers’ retirement system to divest from fossil fuels.

Fink said he would continue pushing both the private and the public sectors to invest in green technology. “To get through a decarbonized world that is fair and just, we’re going to need to have some incredible breakthroughs in technology that we don’t have yet,” he said.

Europe’s Second Largest Pension to Divest From Fossil Fuels

Op-Ed: The Climate Investment Dilemma—Divestment or Decarbonization?

Tags: BlackRock, Climate Change, COP26, divest, Gas, Hydrocarbon, Larry Fink, New York State Common Retirement Fund (NYCRF), New York State Teachers’ Retirement System, oil

The US Securities and Exchange Commission (SEC) has agreed to a $38.8 million settlement with now-defunct music-streaming business Akazoo for allegedly defrauding investors out of tens of millions of dollars during a special purpose acquisition company (SPAC) business combination.

According to the SEC’s complaint, Akazoo, which was based in Greece, portrayed itself to investors as a rapidly growing music-streaming company focused on emerging markets. The company claimed in its proxy statement to have 38.2 million registered users, 4.6 million paying subscribers, and more than €105 million ($120.6 million) in annual revenue. Akazoo allegedly used these “misrepresentations” to attract investors to its SPAC business combination in 2019, in which the company received nearly $55 million in funds.

“In reality, as it recently admitted in a public filing with the SEC, the Nasdaq-listed company had no paying users and negligible, if any, revenue,” said the complaint.

Akazoo was formed from a 2019 business combination between purported subscription-based online music-streaming company Akazoo Limited, which was formed in 2010, and SPAC Modern Media Acquisition Corp. As a result of the business combination, Akazoo held $54.8 million in investor funds, $14.2 million of which were from Modern Media’s shareholders, and another $40.6 million of which came from individual and institutional investors through a private investment in public equity (PIPE) offering at the time of the combination.

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Following the business combination, Akazoo listed on Nasdaq and proceeded to defraud retail investors, according to the complaint, by misrepresenting that it had earned tens of millions of dollars in revenue during 2019 and increased its paying subscriber base by 28% from the previous year. But the company continued to have limited operations, no subscribers, and marginal revenue, while depleting more than $20 million of investor funds.

“The company obtained these investor funds by grossly misrepresenting the nature and success of its music-streaming business,” said the complaint.

Akazoo allegedly continued to mislead the public while its shares were traded on the Nasdaq from September 2019 to May 2020. For example, the SEC said Akazoo claimed €64.5 million in revenue during the first half of 2019, and €15.6 million in gross profit based on operations in 25 countries. However, “in reality, Akazoo generated at most negligible revenue, operated in only a few countries, and its only significant source of funds was the $54.8 million it had raised from investors,” said the complaint.

The company’s board launched an internal investigation following an April 2020 short-seller report from Quintessential Capital Management that accused the company of fraud, saying there was “overwhelming evidence suggesting that Akazoo may be just a tiny, loss-making company based in Greece with negligible user base and sales.”

In a Form 6-K filed with the SEC the following the month, the company admitted that the investigation uncovered that “former members of Akazoo’s management team and associates defrauded Akazoo’s investors … by materially misrepresenting Akazoo’s business, operations, and financial results as part of a multiyear fraud.”

The settlement orders Akazoo, which neither denies nor admits the findings of the complaint, to pay $38.8 million in disgorgement, an amount that the SEC said will be deemed satisfied by the company’s payment of $35 million to the investor victims and settlements in connection with several private class action lawsuits.

“The SEC is intently focused on SPAC merger transactions, and we will continue to hold wrongdoers in this space accountable,” David Peavler, regional director of the SEC’s Fort Worth Regional Office, said in a statement.