BlackRock CEO Larry Fink walks tightrope on climate investing

BlackRock CEO Larry Fink walks tightrope on climate investing
Illustration of a man balancing on the edge of a hundred dollar bill

Illustration: Sarah Grillo/Axios

This year’s chairman’s letter from BlackRock CEO Larry Fink, published Wednesday, gives less emphasis to climate risk and environmental, social and governance (ESG) investments than past letters — but doesn’t play down the substance.

Why it matters: As the head of the world’s largest asset manager, Fink’s letters are widely taken as a signal for how the financial community is thinking about certain topics, and how policy makers may need to respond.

Driving the news: His latest letter departs from those of the past several years, which focused largely on the need to incorporate climate risk, ESG concerns and broader corporate responsibility issues into how business should be conducted.

  • BlackRock is a top target of right-wing interest groups and Republican lawmakers, who have accused the firm — and specifically Finkof pushing a so-called “woke” investing trend that does not serve investors’ interests.
  • Recently, several states have moved to pull money out of BlackRock funds, alleging the firm boycotts fossil fuels, which the company rebuts again in the new letter by touting its natural gas investments.

Between the lines: Fink’s latest dispatch deemphasizes ESG investing — increasingly a politically fraught topic compared to his most recent annual letters. In fact, the term ESG does not appear anywhere in the letter.

  • The energy transition concerns are not raised until paragraph 18, and the word “climate” doesn’t appear until the eighth page of the lengthy letter. Even when it does, climate is only used five times.

Zoom in: Still, the letter indicates the company is not backing away from climate concerns.

  • “For years now, we have viewed climate risk as an investment risk. That’s still the case,” the letter states.
  • Fink discusses the investment opportunities associated with the energy transition, potential financial repercussions from climate change-related extreme weather events and the need for companies BlackRock invests in to disclose their climate change-related risks.
  • Fink positions BlackRock as offering choices to clients. He also makes clear the firm does not direct companies it invests in to take certain actions on climate change or other issues, with a more hands off approach to proxy voting than in years past.

Yes, but: Fink’s statement that asset managers including BlackRock should not set policy or “be the environmental police” contrasts with his 2020 letter to investors.

  • That letter stated: “BlackRock does not see itself as a passive observer in the low-carbon transition. We believe we have a significant responsibility — as a provider of index funds, as a fiduciary, and as a member of society — to play a constructive role in the transition.”

The intrigue: Environmental groups cautioned against Fink’s messaging on consumer choice in particular.

  • “Despite what BlackRock may say, the company appears to be giving ground to those who are trying to undermine the finance sector’s role in addressing the climate crisis,” said Cleo Rank, a sustainable finance analyst at InfluenceMap, a lobbying watchdog group.

What they’re saying: “[BlackRock is] the 800 pound gorilla here and they’re definitely walking a tightrope,” Daniel Firger, managing director of Great Circle Capital Advisors, a climate finance consultancy, told Axios in an interview.

  • “It’s heartening to see the world’s largest asset manager not walk back from its very clear fiduciary mandate to think about climate related risks,” he said.