How a 2021 sustainable investment pact gave the Holy See structural access to global proxy voting.

The institution that manages sovereign wealth does not need to own what it influences. It needs access to who does.

Three asset managers, BlackRock, Vanguard, and State Street, hold voting rights over the majority of publicly traded companies in the world. They do not hold those rights because they own the shares outright. They hold them because millions of pension funds, retirement accounts, and institutional investors have placed their capital in index products that these firms manage. When a shareholder vote is called, BlackRock votes. Vanguard votes. State Street votes. The individual saver does not.

Combined, the three firms manage approximately $22 trillion in assets. That number understates their actual reach. Because they operate index funds that replicate entire markets, they are simultaneously the largest single shareholder in most major corporations. They vote together, not because they coordinate explicitly, but because they hold the same stocks and use the same proxy advisory infrastructure.

On June 8, 2021, Reuters reported that the Vatican had signed a formal agreement with BlackRock, the largest of the three, on sustainable investment guidelines.

That is not a footnote. That is a structural fact.

The Mechanics of Proxy Power

When a pension fund buys shares in a BlackRock index product, it transfers its voting rights to BlackRock. This is standard practice, disclosed in fund documentation, accepted as a condition of index investing. The client sees the return. BlackRock sees the boardroom.

BlackRock votes approximately 17,000 times per year across its equity holdings. For most companies it holds, BlackRock is the single largest shareholder, with stakes between five and fifteen percent of outstanding shares. That threshold is sufficient to determine outcomes in contested governance votes: CEO compensation, board composition, strategic acquisitions, ESG reporting requirements, and capital allocation priorities.

On May 26, 2021, activist fund Engine No. 1 won three seats on ExxonMobil's board of directors with less than 0.02 percent of the company's outstanding shares. The vote passed because BlackRock, Vanguard, and State Street voted in favor of the replacement directors. ISS had issued a split recommendation; Glass Lewis recommended in favor of the activists. The three largest index managers held sufficient equity to override ExxonMobil's incumbent board regardless of how any other shareholder voted. Engine No. 1 did not need to own ExxonMobil. It needed to be on the right side of who does the voting. Eleven days later, the Vatican signed its agreement with BlackRock.

The mechanism that shapes those votes operates two levels removed from public view. BlackRock, Vanguard, and State Street all contract with the same two proxy advisory firms: Institutional Shareholder Services (ISS) and Glass Lewis. These two firms advise on how to vote in approximately 97 percent of US proxy contests and cover more than 40,000 shareholder meetings globally per year. They are not elected. They are not regulated as financial advisors in most jurisdictions. They publish recommendation frameworks. Asset managers follow them. The asset managers' clients never see the recommendations.

ISS was founded in 1985. Glass Lewis was founded in 2003. Between them, they have operated the recommendation infrastructure for the world's largest capital allocation mechanism for a combined period of over sixty years. Scholars of institutional investor governance have documented this concentration as a structural concern independent of any specific agreement: a duopoly in proxy advice, exercised across the same holdings, by the same asset managers, against criteria set through institutional relationships that no individual shareholder participates in.

Their frameworks define what counts as acceptable governance, responsible environmental practice, and appropriate capital deployment. Those definitions are not neutral. They are structural.

The concentration of that advisory authority in two firms is itself a governance question that neither firm evaluates. ISS and Glass Lewis set the criteria against which corporations are measured. They are not measured against those criteria themselves. Whoever shapes the relationships that inform their frameworks shapes the recommendations. Whoever shapes the recommendations shapes the votes.

Proxy ballots are legal instruments. They are filed through custodian banks, processed by transfer agents, and submitted to corporate secretaries against schedules set by securities regulators in each jurisdiction. BlackRock's Investment Stewardship team reviews ballot recommendations against the firm's published voting guidelines before each deadline. The ballot is cast in the name of the fund. The individual fund holder's name does not appear on it. What determines the vote is the framework. What determines the framework is the institutional conversation the June 2021 agreement was structured to enter.

Whoever participates in the criteria that ISS and Glass Lewis evaluate participates in the vote without casting it.

This is not influence. This is the infrastructure of influence.

June 8, 2021

The Reuters headline was unambiguous: Vatican signs pact with BlackRock on sustainable investment. The agreement, signed between the Holy See's Dicastery for Promoting Integral Human Development and BlackRock, established a framework through which sustainable investment criteria would incorporate human dignity considerations, environmental responsibility standards, and just defense as a distinct capital allocation category.

BlackRock's Chief Executive Larry Fink had been publishing annual letters to CEOs since 2018 arguing that ESG criteria, environmental, social, and governance, would become central to how capital is allocated globally. By 2021, BlackRock had become the largest single advocate of ESG-integrated investing among institutional asset managers. The Vatican's agreement formalized a relationship between that framework and the world's largest institutional religious organization.

ESG is not a unified doctrine. It is a contested governance language through which institutions compete to define acceptable capital behavior. Environmental criteria vary between rating agencies and legal jurisdictions. Social metrics resist standardization across markets. Governance categories are internally inconsistent between regions. In 2023, several US states enacted legislation restricting public pension managers from applying ESG criteria to fiduciary decisions, creating direct legal tension with the recommendations ISS and Glass Lewis routinely issue. What gives the criteria conversation its structural significance is not coherence but reach: whatever ESG means in any given regulatory context, the institutions that participate in defining its categories determine how capital is positioned at scale.

The Vatican manages an investment portfolio estimated at EUR 10 to 15 billion across its various entities: the Institute for Works of Religion (IOR, the Vatican Bank), the Administration of the Patrimony of the Apostolic See (APSA), and dozens of congregational funds. That portfolio makes the Vatican a mid-sized institutional investor, relevant in specific markets but not dominant in any single one. The EUR 15 billion figure is approximately 0.15 percent of BlackRock's assets under management.

What the Vatican is not is a financial institution that maximizes yield. It is a sovereign entity with diplomatic relations in 183 countries, observer status at the United Nations, a legal system independent of Italian jurisdiction, and a stated moral authority that shapes the publicly articulated priorities of over one billion people. That combination, sovereign status plus institutional moral framing plus formalized financial access, produces advisory weight that does not appear on any balance sheet.

The Vatican does not own BlackRock. BlackRock does not own the Vatican. Each institution has what the other cannot acquire directly. BlackRock has the votes. The Vatican articulates institutional positions on climate, human dignity, and defense that align with the categories major ESG frameworks evaluate. The 2021 agreement put those positions in formal proximity to the firm that votes those frameworks into corporate governance.

That is not a partnership. That is a structural alignment.

The Institution That Learned

The Vatican has spent eight decades learning how financial architecture operates from the inside.

The Institute for Works of Religion was founded in 1942 under Pope Pius XII to manage the financial interests of Catholic religious organizations during wartime. Its legal status as a sovereign institution, accountable only to the Pope, exempted it from Italian banking regulation from the beginning. That exemption was not incidental. It was the institution's structural purpose.

Between 1971 and 1989, Archbishop Paul Marcinkus of Illinois served as IOR's president. During that period, the IOR held shares in Banco Ambrosiano, the Milan bank presided over by Roberto Calvi, who was simultaneously a member of Propaganda Due, the P2 Masonic lodge whose membership list, discovered by Italian police in 1981, included 51 military generals, 29 admirals, three cabinet ministers, and Silvio Berlusconi. Banco Ambrosiano collapsed in June 1982 with $1.3 billion in missing funds. The money had passed through IOR into shell companies in Panama, the Bahamas, and Liechtenstein.

Roberto Calvi was found hanging from Blackfriars Bridge in London on June 18, 1982, his pockets filled with bricks and cash. An Italian court ruled in 2002 that he had been murdered. The IOR acknowledged moral responsibility for $250 million of Ambrosiano's debts and paid. It did not acknowledge legal responsibility. Archbishop Marcinkus, protected by Vatican diplomatic immunity, was never charged by Italian or British authorities. Marcinkus retired to Sun City, Arizona, in 1990. He died there in 2006.

In 2012, the Council of Europe's anti-money-laundering body MONEYVAL placed the Vatican on its monitored list. Pope Francis, elected in 2013, initiated financial reforms and established external auditing for the first time in the institution's history. In 2019, Vatican police raided the Holy See's own financial secretariat over a EUR 200 million London real estate transaction, a Sloane Avenue property purchased through intermediaries, that produced approximately EUR 100 million in losses. Cardinal Angelo Becciu, formerly one of the Vatican's most senior administrators, was convicted by a Vatican tribunal in December 2023, the first cardinal ever so convicted, of embezzling more than EUR 100 million in church funds. He received a five-and-a-half-year sentence. The Vatican published its first consolidated annual financial statement in 2020.

Financial reforms did not diminish the institution's appetite for institutional positioning. They legitimized it. An institution with audited accounts and published financial statements is an institution that can sign agreements with globally regulated asset managers and withstand the due diligence that precedes such agreements. The 2021 BlackRock pact followed directly from a decade of institutional credentialing that began under Pope Francis.

What the institution built across eight decades was not a series of scandals. It was a curriculum.

The Vatican Bank's history is not a record of failures. It is a record of what sovereign financial architecture absorbs without structural consequence.

The Coordination Channel

Structural coordination does not require explicit instruction. It requires shared criteria and aligned incentives.

What the 2021 agreement enabled is not documented in any post-signing ISS proxy recommendation. It operates at the level of institutional positioning, not instruction. The Vatican did not gain a seat at a table where votes are assigned. It gained access to the conversation where the criteria that determine votes are written. That distinction matters. It is also the distinction that makes the mechanism invisible to any standard account of financial power.

The Vatican's stated ESG priorities are documented in its public encyclicals and institutional statements: climate action as formulated in Laudato Si (2015), renewable energy transition, just defense as a category distinct from aggressive militarism, and investments that preserve human dignity. These priorities are public documents. They are not private directives.

ISS and Glass Lewis evaluate corporate behavior against published criteria. They recommend votes based on how companies perform against environmental targets, board diversity standards, executive compensation ratios, and defense sector classification. Whoever participates in shaping those criteria through advisory relationships, institutional dialogue, and formalized agreements participates in determining how votes land. The Vatican's formal agreement with BlackRock gave it institutional access to the process through which sustainable investment criteria are defined at the firm that casts more proxy votes than any other single entity in the world.

The operational relevance of just defense as a capital allocation category became structurally visible in January 2026, when the German government authorized the Sondervermogen, a EUR 500 billion special defense fund outside the constitutional debt brake. European defense contractor valuations repriced immediately. BlackRock's index holdings in Rheinmetall, Leonardo, Thales, and BAE Systems, which it votes as the largest single shareholder in each, voted in favor of board proposals supporting accelerated production capacity and capital expenditure expansion. Pension funds that held BlackRock index products saw those holdings appreciate. The individual holders of those pension funds did not vote on the defense expenditure question. BlackRock did.

None of this produces uniform outcomes. BlackRock's stewardship team operates under fiduciary and legal constraints that differ by jurisdiction. Shareholders vote against proxy advisory recommendations with regularity. The same ESG criteria that determine a vote in Germany produce a different recommendation in Brazil. In the United States, the SEC revised its proxy advisory rules in 2020 and again in 2022 under competing administrations, reflecting the legal and political instability of the frameworks ISS and Glass Lewis apply.

In December 2022, Vanguard withdrew from the Net Zero Asset Managers initiative, citing fiduciary obligations that it determined were inconsistent with the initiative's climate alignment requirements. The withdrawal removed approximately $7 trillion in assets from the signatory base. BlackRock remained a member. The same governance framework, evaluated by institutions with overlapping holdings and shared proxy infrastructure, produced opposite institutional commitments within eighteen months of the Vatican pact. The structural relevance of institutional criteria-setting lies not in whether it produces consistent outcomes, but in who participates in defining the governance language through which those inconsistencies are processed.

Three asset managers hold voting rights over the majority of the world's publicly traded companies. They vote through the same two proxy advisory firms. Those firms evaluate companies against ESG criteria. ESG is contested, inconsistent, and politically contested across jurisdictions. Institutions that participate in defining those criteria, however contested, shape how votes land without casting them. The Vatican formalized that participation in June 2021. The criteria carry the weight of $10 trillion in assets under management. That is not sustainable investment. That is a coordination mechanism.

This is not conspiracy. This is institutional architecture operating at the scale where coordination becomes structural.

The Strongest Counterargument

The strongest counterargument to this reading does not dispute the 2021 agreement or the proxy voting mechanics. It accepts both and argues that they demonstrate less than they appear to.

A well-informed institutional investor would observe that BlackRock has signed similar ESG partnership agreements with dozens of organizations: governments, central banks, universities, and international bodies. The Vatican's EUR 10-15 billion portfolio is a rounding error relative to BlackRock's $10 trillion in assets under management. Advisory access is not decision-making authority. ISS and Glass Lewis develop their criteria through consultation with thousands of institutional stakeholders, not through any bilateral relationship. The Vatican's stated ESG priorities on climate, renewable energy, and human dignity are mainstream institutional investor positions that large asset managers would adopt regardless of Vatican participation. What looks like structural coordination is, in this reading, convergence among institutions that share premises about long-term capital risk. The Sondervermogen vote alignment follows from index fund mechanics, not from any Vatican influence on defense classification criteria.

The Vatican may ultimately have had little measurable impact on any specific proxy outcome. The significance of the 2021 agreement may instead lie in what it reveals about how modern governance systems seek legitimacy: by incorporating institutional moral authority into the frameworks through which capital decisions are formalized. If that reading is correct, the Vatican's participation is less an exercise of influence than a symptom of how governance credibility is currently constructed. That does not diminish the structural observation. It clarifies it.

This interpretation would weaken substantially if Vatican institutional representatives were demonstrably absent from the advisory consultations where ISS and Glass Lewis criteria are developed, or if BlackRock's stewardship documentation showed that inputs from faith-based institutions are treated as ceremonial rather than operational. Neither condition has been publicly established. The opacity that makes the influence claim difficult to prove makes the counterargument equally difficult to confirm.

The reading offered here does not claim that the Vatican directs BlackRock's votes. It claims something narrower: that the 2021 agreement formalized an institutional access channel that did not previously exist, at the moment when proxy voting became the primary mechanism through which capital allocation direction is determined in global markets. At that scale, access to the criteria conversation is the point of maximum leverage at minimum cost.

What the Architecture Accounts For

The proxy machine runs without names. It runs on frameworks, recommendations, criteria, and fiduciary duty. The individual saver whose pension fund is managed by a BlackRock index product does not vote. They do not see the proxy advisor's recommendation. They do not know that their shares voted against a board candidate, in favor of a climate resolution, or to approve a defense contractor merger. They see quarterly statements. They see returns. The criteria conversation happens elsewhere.

The Vatican signed a formal agreement with the firm that casts those votes on their behalf. The agreement was announced by Reuters on June 8, 2021. It has been in the public record since that date. It does not appear in any major analysis of institutional power concentration or capital allocation architecture.

That absence is not unusual. The proxy advisory system is not designed to be opaque. It is designed to be efficient. Opacity is a structural byproduct, not an engineered feature. The effect is the same: the mechanism that determines how corporate governance votes fall is legible only to the institutional actors who participate in the conversation where criteria are set.

In the months following the ExxonMobil vote, BlackRock published its 2021 Global Stewardship Report. The document described the firm's voting rationale across its major engagements for the year: climate governance, board composition, executive compensation, and strategic capital deployment. In its environmental section, it outlined the criteria under which board directors were evaluated for climate transition competency. The report was available on BlackRock's investor relations page. It was not addressed to the pension fund holders whose proxies BlackRock had voted. It was addressed to the governance professionals, institutional researchers, and criteria-setting bodies whose frameworks it had consulted and reflected. The individuals whose capital had participated in those votes were not in the document's intended readership. They never are.

The Vatican Bank's history demonstrates that the institution has learned, over eight decades, to operate through sovereign channels that standard regulatory oversight does not reach. The institution that survived Banco Ambrosiano, that paid $250 million in moral responsibility and called it closed, that watched a cardinal be convicted in December 2023 and continued operating the following morning, signed a sustainable investment pact with the world's largest asset manager. The institution did not change. The mechanism it gained access to did.

The institution that manages sovereign wealth does not need to own what it influences. On June 8, 2021, it signed a formal agreement with who does. The vote was cast by BlackRock. The recommendation that informed it was issued by ISS, evaluated against published governance criteria developed through the institutional consultation processes the June 2021 agreement was designed to access. Whether that access translated into influence over any specific recommendation is a question the mechanism does not require to be answered.

Most participants in the system never see the governance layer at all. They see performance, returns, and quarterly reports. The criteria conversation happens elsewhere. The institution that manages sovereign wealth understood that.

The architecture assigns institutional roles with remarkable consistency, even when the participants themselves experience the system as fragmented. The only actor without a designed role is the one watching their retirement account move based on votes they did not cast, criteria they did not set, and a June 2021 agreement they have never read.

This coordination mechanism has two deeper institutional layers. David Rockefeller's Architecture of Private Policy documents how the Trilateral Commission established policy frameworks before governments could ratify them in 1973, the same structural logic the proxy advisory system applies to capital allocation today. In 1981, Police Found a List of 51 Generals, 29 Admirals, Three Cabinet Ministers, and Silvio Berlusconi traces the P2 network that ran through Banco Ambrosiano, the same institution whose collapse defined the Vatican Bank's relationship with sovereign financial immunity, forty years before the BlackRock pact was signed.

Jerry van der Laan writes The Manifest Archive, forensic analysis of the systems that shape power, policy, and history.

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