BlackRock CEO Larry Fink has said it is not the role of asset managers to “engineer a particular outcome in the economy” amid the increasing politicization of ESG investing in the US.
In his annual letter to investors published yesterday, Fink said: “As minority shareholders, it’s not our place to be telling companies what to do.
“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, he also said voting choice can “enhance corporate governance by bringing new voices into shareholder democracy” but added investors need to be informed in order to direct their votes, cautioning against relying too much on proxy advisers.
In November last year, BlackRock announced plans to expand its proxy voting choice programme to some individual fund shareholders, initially in the UK, following the launch of its voting choice option for institutional investors.
Fink’s 2023 letter comes just weeks after the US Senate voted to block the Department of Labor’s ESG rule for retirement plans, which was accused of “politiciz[ing] millions of Americans’ retirement investments”.
It reiterated his position that while BlackRock considers climate risk to be investment risk, the firm’s only aim is to offer choice to help clients reach their investment goals, adding that for many that will mean taking climate and transition factors into consideration.
“The transition to a low-carbon economy is top of mind for many of our clients. Our clients have a range of investment objectives and perspectives. We have clients who want to invest in ways that seek to align with a particular transition path or to accelerate that transition. We have clients who choose not to. We offer choice to help clients reach their investment goals, and we manage their assets consistent with their objectives and guidelines.”
He added more than half of the companies in the S&P 500 now voluntarily report Scope 1 and Scope 2 emissions and that he expects that number will continue to rise.
Alexandra Mihailescu Cichon, executive vice-president of RepRisk noted: “Despite not mentioning ESG explicitly in BlackRock’s nearly 10,000-word annual chairman’s letter to investors, it is implicitly woven throughout. The underlying strategy and approach has not changed – even if some of the language has. This a message to all stakeholders that sustainability risk and double materiality remain key pillars for both investing and doing business with the viability of the economy, people, and the planet in mind.”
In March 2021, Fink said he was being “yelled at by both sides” when it comes to taking action on climate change.
Speaking at an Economist event, Fink said: “Some people think BlackRock is not moving fast enough, some people think we’re moving too rapidly and destroying jobs, and I’m getting letters from both sides…maybe that’s a good sign we’re moving rapidly because I’m getting equally yelled at.”
His 2023 letter is likely to provoke similar reactions. For example, Kentaro Kawamori, CEO and co-founder of Persefoni, said: “Larry Fink is exactly right when he says ‘climate risk is investment risk.’ But, we go a step further and say ‘climate risk is financial risk.’ It’s business risk. The transition to a low-carbon economy requires companies to think about carbon with the same rigor as their financials in terms of how it’s tracked, used, and disclosed.”