BlackRock cools ESG tone amid pullback but defends air conditioning strategy

BlackRock walks a fine line on what Red America calls awakened capitalism, one of the most thorny culture war issues.

The world’s largest wealth manager is toning down rhetoric about its support for so-called ESG investing that takes into account climate risks and social justice policies, while making it clear it has no intention of abandoning the controversial financial strategy.

In his annual letter to investors, BlackRock CEO Larry Fink said it was not the role of private companies to “be the environmental police.” But he said it’s “still the case” that the company views “climate risk as an investment risk.”

“Our clients often invest for the long term, and we assess all types of long-term investment risks that could impact their portfolios – such as inflation, geopolitics or the energy transition,” wrote Mr. Fink. “We know the transition will not be a straight line. Different countries and industries will move at different speeds, and along the way, oil and gas will play a critical role in meeting global energy needs.”

His dovish change of tone comes after more than a year of intense lobbying by Republican officials and lawmakers across the country against environmental, social and corporate governance investments, known as ESG. They particularly target Mr. Fink and BlackRock, which conservative critics see as prime examples of the investment movement.

ESG critics say Mr. Fink has used the giant’s $10 trillion in assets under management and its proxy voting at public companies to force executives to make decisions based on climate protection and diversity quotas that jeopardize returns on investments.

Consumers’ Research, a conservative advocacy group that is a leading ESG opponent and BlackRock critic, accused Mr. Fink of trying to placate climate activists and ESG enemies amid a broader war on the movement that has cost the company billions in lost business tasted by Republicans. led states.

Will Hild, executive director of Consumers’ Research, said while he was “encouraged to see that they’re definitely feeling the heat,” the Republicans’ pullback was unsurprising.

“He’s not wrong when he says he’s stuck between two sides,” Mr. Hild said in an interview. “What he’s doing wrong is that he seems to be claiming that that makes him sort of a moral centrist where he has extremists on both sides. He absolutely walks a tightrope of his own making and wrongdoing.”

By retracting some of BlackRock’s more aggressive promises on ESG and achieving net-zero emissions targets, Mr. Fink has also drawn fire from clients representing Blue America. In defense of the GOP’s claims that the company is “boycotting” fossil fuels, BlackRock highlights the more than $200 billion it has invested on behalf of clients in the oil and natural gas sector.

Last September, New York City announced that it was reassessing its relationship with the company amid concerns it was deviating from its “climate commitments.”

In this year’s letter to shareholders, Mr. Fink tried to thread the needle by emphasizing that it is ultimately up to individual investors – not BlackRock – to determine where money should be invested. He explained their position at length under a section titled, “Helping Clients Navigate and Invest in the Global Energy Transition.”

“We have clients who want to invest in a way that aligns with or accelerates a specific transition path. We have customers who choose not to,” wrote Mr. Fink. “We offer our clients choice to help them achieve their investment goals and we manage their wealth in line with their goals and guidelines.”

Mr. Fink’s more neutral stance contrasts with his 2020 investor letter, which said the company “does not see itself as a passive observer of the low-carbon transition.”

“We believe we have a significant responsibility — as an index fund provider, as a trustee and as a member of society — to play a constructive role in the transition,” he wrote at the time.

Still, this time Mr. Fink said there is money to be made regardless of whether customers approve climate investments or not. He specifically cited the $370 billion earmarked for clean energy in last year’s Democrats’ Tax and Climate Spending Act — called the Anti-Inflation Act — as “significant opportunities for investors to allocate capital to the energy transition.”

“Some of the most attractive investment opportunities over the coming years will be in the area of ​​transition financing,” wrote Mr. Fink. “Given the importance to our clients, BlackRock’s goal is to be the lead investor on these opportunities on their behalf.”

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