BlackRock CEO Larry Fink admitted in a 2023 annual letter to investors that oil and gas are “vital” to global energy demand—a shift from his earlier stance promoting a climate change agenda which focused on progressive values that denounce fossil-based fuels.
“For years now, we have viewed climate risk as an investment risk. That’s still the case,” the letter states. However, the transition toward a low-carbon economy “will not be a straight line,” with various industries and nations moving at different speeds in terms of adoption. “Oil and gas will play a vital role in meeting global energy demands through that journey,” Fink said in the letter. “To ensure the continuity of affordable energy prices during the transition, fossil fuels like natural gas, with steps taken to mitigate methane emissions, will remain important sources of energy for many years ahead.”
Fink’s admission that fossil fuels are “vital” to the economy is a marked change from the past years when the CEO aggressively promoted energy transition.
In his 2020 letter to CEOs, for example, Fink predicted that there will be a “significant reallocation of capital in the near future” while pointing to climate change. “I believe we are on the edge of a fundamental reshaping of finance.”
Fink also talked about BlackRock “exiting investments that present a high sustainability-related risk, such as thermal coal producers” and “launching new investment products that screen fossil fuels” in the 2020 letter.
However, BlackRock has suffered losses in recent times, putting the company under pressure. Between 2021 and 2022, BlackRock’s revenues fell from $19.37 billion to $17.87 billion. Its assets under management fell from $10.01 trillion to $8.59 trillion.
In October 2022, BlackRock was downgraded by UBS, with analyst Brennan Hawken stating that the downgrade was because of “environmental pressure to earnings and risk from the firm’s ESG positioning,” referring to environmental, social, and governance (ESG) issues.
Engineering ESG Change
In the recent investor letter, Fink stated that many of the institution’s clients seek BlackRock’s help to determine the “future paths of carbon emission” to make investment decisions, including on government policies.
Fink stressed in the letter that it is not the role of an asset manager like Blackrock to “engineer a particular outcome in the economy.”
“As I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police.”
However, BlackRock has been blamed for pushing an ESG agenda by numerous U.S. state governments. In August 2022, a coalition of 19 state attorneys general from Republican-leaning states sent a letter (pdf) to Fink criticizing BlackRock for having “committed to implementing an ESG engagement and voting strategy across all assets under management.”
The letter points out that BlackRock held more than 2,300 company engagements on climate and took voting action against 53 firms for climate issues while putting 191 businesses under watch.
BlackRock has been a prominent member of the Glasgow Financial Alliance for Net Zero (GFANZ) which is pushing for a “systemic change” aimed at altering the planet’s “climate trajectory” by bringing together “over 450 leading financial enterprises united by a commitment to accelerate the decarbonization of the global economy,” said the state attorneys general.
The investment firm had also committed to ensuring that all assets under its management achieve net-zero emissions by 2050 or sooner, said the letter. “BlackRock’s belief that the world will require net zero by 2050 could be a pretext to force companies to adopt your preferred climate policies.”
BlackRock’s coordination with other financial institutions to impose net-zero standards also raises antitrust concerns, it said.
States have taken action against BlackRock for pursuing ESG policies. In October, Louisiana informed the company that the state will be liquidating all its investments with the firm. “Your blatantly anti-fossil fuel policies would destroy Louisiana’s economy,” Treasurer John Schroder wrote in a letter to Fink.
In December 2022, Florida announced that its treasury will start divesting $2 billion worth of assets managed by BlackRock.
“BlackRock CEO Larry Fink is on a campaign to change the world. In an open letter to CEOs, he’s championed ‘stakeholder capitalism’ and believes that ‘capitalism has the power to shape society,’” said Florida chief financial officer (CFO) Jimmy Patronis, according to a press release on Dec. 1. “I think it’s undemocratic of major asset managers to use their power to influence societal outcomes.”
“If Larry or his friends on Wall Street want to change the world—run for office. Start a nonprofit. Donate to the causes you care about. Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.”