BlackRock CEO Says Stakeholder Capitalism Isn't 'Woke'
"We focus on sustainability not because we're environmentalists, but because we are capitalists and fiduciaries to our clients," Larry Fink said, encouraging companies to prioritize long-term profits over short-term results.
January 18, 2022 at 12:59 PM
4 minute read
BlackRock Inc. Chief Executive Officer Larry Fink warned that companies will be left behind if they don't embrace sustainable business practices, hitting back at critics who say that considering environmental impact in investing decisions is a politically motivated fad.
"Stakeholder capitalism is not about politics," Fink wrote in his annual letter to CEOs. "It is not a social or ideological agenda. It is not 'woke.'"
In the decade Fink's been writing his letter, BlackRock has ballooned to more than $10 trillion in assets, giving it significant stakes in many large companies. It's also been a major beneficiary of the boom in sustainable investing: its portfolio includes $509 billion in sustainable assets, more than double the amount a year ago.
It also sees more on the horizon. But BlackRock's growth and Fink's high-profile missives have drawn critics from all corners. On the left, progressives complain that BlackRock and others aren't using their financial clout to do more, faster. On the political right, some U.S. states have declared that they won't do business with asset managers that, for example, eschew oil and gas investments.
Fink used this year's letter, published on the firm's website late Monday in New York, to clearly state its position on fossil fuels. "Divesting from entire sectors — or simply passing carbon-intensive assets from public markets to private markets — will not get the world to net zero," he said. "And BlackRock does not pursue divestment from oil and gas companies as a policy."
In fact, it does the opposite. The firm's ESG exchange-traded funds not only hold stakes in fossil-fuel giants such as Exxon Mobil Corp. and Chevron Corp., its biggest ESG ETF holds a heavier weighting in 12 fossil-fuel stocks than the S&P 500 does, according to Bloomberg Intelligence, the research arm of Bloomberg.
Capitalism — not climate — took center stage in this year's letter, a marked change from the last few years. "We focus on sustainability not because we're environmentalists, but because we are capitalists and fiduciaries to our clients," he wrote, encouraging companies to prioritize long-term profits over short-term results.
He also called on companies to make themselves more appealing to employees in a tight labor market, saying that "workers demanding more from their employers is an essential feature of effective capitalism."
Fink didn't mention climate until the final sections of his letter, and then just four times, including once in the context of the Task Force on Climate-related Financial Disclosures and once to say that businesses "cannot be the climate police." He also emphasized the immediate need for fossil fuels to ensure energy supplies, saying that ambitious goals take time.
Environmental activists almost immediately registered their disappointment, accusing Fink of trying to play both sides. "Fink apparently wants to be above the political fray, but by playing nice with those profiting off of the causes of climate change, he's making the political choice to reject climate science," said Moira Birss, Climate and Finance Director for Amazon Watch, a rainforest protection group based in California.
For BlackRock and others, ESG investing has become a highly lucrative strategy. Philipp Hildebrand, the firm's vice chairman, said in October that BlackRock expects "a vast reallocation of capital toward sustainable products."
Fink also prodded shareholders and governments for action. Governments, he said, should offer more guidance on sustainability policy, regulation and disclosure across markets. BlackRock is also working on an initiative that would give clients more power to vote their proxies.
More from Fink's letter:
• The pandemic has fundamentally shifted the nature of work, leading to more turnover and more staff seeking flexibility. "Companies not adjusting to this new reality and responding to their workers do so at their own peril."
• Sustainable investments have reached $4 trillion and will continue to rise. "The decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime. It will also leave behind the companies that don't adapt."
• BlackRock is working to expand an initiative for investors to use technology to cast proxy votes. "We are committed to a future where every investor — even individual investors — can have the option to participate in the proxy voting process if they choose."
• Fink said that he plans to launch a Center for Stakeholder Capitalism to create a "forum for research, dialogue, and debate." The center will help to explore the relationships between companies and their stakeholders, he said.
Silla Brush and Russell Ward report for Bloomberg News.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllTrump Mulls Big Changes to Banking Regulation, Unsettling the Industry
CFPB Orders Big Banks to Limit Overdraft Fees to $5. But Will Its Edict Stick?
3 minute readUS Judge Throws Out Sale of Infowars to The Onion. But That's Not the End of the Road for Sandy Hook Families
4 minute readGreenberg Traurig Initiates String of Suits Following JPMorgan Chase's 'Infinite Money Glitch'
Trending Stories
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250