Annual letter from boss of world’s largest asset manager defends focus on climate action, but campaigners accuse BlackRock of continuing to invest heavily in fossil fuels infrastructure
The boss of the world’s biggest asset manager has this morning cast the decarbonisation of the global economy as the “greatest investment opportunity of our lifetime”, predicting that companies that fail to embrace sustainable business models will suffer as a result.
In his annual letter to the CEOs of the companies in which BlackRock invests, CEO Larry Fink claimed the net zero transition represented a fundamentally capitalist enterprise, insisting the investment giant’s continued focus on sustainability and stakeholder capitalism during the year ahead was motivated by a pursuit of profit, insisting the firm was neither environmentalist nor ‘woke’.
The adoption of net zero targets by top investors and the rapid expansion of sustainable investment products has been criticised by some politicians and financiers who have branded it as part of a ‘woke’ agenda that pushes investors to look beyond their basic fiduciary duty to maximise returns.
But Fink today categorically rejected such accusations. “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients,” he wrote.
As such Fink reiterated his previous calls for corporate CEOs to find a “clear sense of purpose” for their organisations and embrace a stakeholder capitalism model, which considers and delivers on the priorities of its employers, customers, and the broader community, as well as company shareholders.
“Your voice is more important than ever,” he told CEOs. “It’s never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy, and a long-term view. Your company’s purpose is its north star in this tumultuous environment.”
Effective stakeholder capitalism would enable companies achieve “durable profitability”, he said, noting that the foundations of capitalism were in “constant reinvention” and had most recently been shaken up by the Covid-19 pandemic’s impact on the world of work and purchasing habits.
“Stakeholder capitalism is not about politics,” he wrote. “It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper.”
Fink’s annual letter to shareholders and CEOs has increasingly focused on sustainability in recent years, with past letters serving to introduce the firm’s new coal exclusion policies and frameworks intended to reduce the emissions of BlackRock’s giant investment portfolio.
But environmentalists have pointed out that the firm’s increasingly vocal stance on climate is at odds with its investment activity, given BlackRock remains one of the world’s largest investors in both fossil fuel companies and businesses linked to deforestation. A report published last year calculated that BlackRock holds $85bn in coal companies, and in January last year the company completed a $15bn deal with Saudi Aramco to acquire 49 per cent of its gas pipeline subsiary .
Today, Fink defended BlackRock’s ongoing investments in fossil fuel firms arguing that divesting from carbon-intensive companies would simply pass assets from public markets to private owners, where they would likely face less pressure to develop decarbonisation strategies.
“Foresighted companies across a wide range of carbon-intensive sectors are transforming their businesses, and their actions are a critical part of decarbonisation,” he said. “We believe the companies leading the transition present a vital investment opportunity for our clients and driving capital towards these phoenixes will be essential to achieving a net zero world.”
However, he also stressed that policymakers needed to take bolder action to help ensure carbon intensive businesses curb their emissions over time. He urged governments to provide “consistent taxonomy for sustainability policy, regulation and disclosure” for different sectors that would enable businesses to decarbonise.
But environmental campaigners were today quick to slam Fink’s latest missive as nothing but “hot air”, arguing the letter suffers from a lack of substance and ambition,
“There’s not much to see here other than more hot air from a would-be climate leader,” said Ben Cushing, fossil free finance campaign manager at the Sierra Club. “Larry Fink’s latest letter to CEOs is just another rehashing of the same vague rhetoric, without any meaningful new commitment to actually help lead the necessary transition to a climate-safe future.
“Fink is insisting on continuing to prop up dirty fuels like fracked gas and peddling the outdated and dangerous view that gas has a place in the energy transition, despite the scientific consensus that we need to stop expanding fossil fuels immediately. Will this be yet another missed opportunity for BlackRock or will it finally hold polluters and laggards accountable?”
And Moira Birss, climate and finance director at Amazon Watch, said Fink was trying to cosy up to the companies that continue to profit off climate change. “The question isn’t who’s ‘woke’ or not, it’s who is leading our economy and our planet on a path either to destruction or to a livable future,” she said. “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, which makes absolutely clear that a rapid transition from all fossil fuels is unquestionably urgent and necessary.”
Fink’s letter did contain some specific new commitments, including the unveiling of fresh plans to launch a Centre for Stakeholder Capitalism, which he said would be a “forum for research, dialogue, and debate” tasked with exploring the relationships between companies and their stakeholders.
BlackRock is also working to expand an initiative that would make it easier for investors to cast proxy votes at the companies they are invested in using technology, he added.
Fink predicted that both start-ups and established businesses would have a role to play in delivering the net zero transition, arguing that the next 1,000 ‘unicorn’ companies – start-ups with a value of over $1bn – would be green innovators focused on products and services that help the world decarbonise.
“It’s not just start-ups that can and will disrupt industries,” he wrote. “Bold incumbents can and must do it too. Indeed, many incumbents have an advantage in capital, market knowledge, and technical expertise on the global scale required for the disruption ahead. Our question to these companies is: what are you doing to disrupt your business? How are you preparing for and participating in the net zero transition?
“As your industry gets transformed by the energy transition, will you go the way of the dodo, or will you be a phoenix?”
Regardless of whether you regard Fink’s letter as ‘hot air’ or a roadmap for the future of capitalism, it is a question every business should be looking to answer.
