BOSTON/LONDON: Larry Fink, chief executive of the world’s biggest asset manager BlackRock Inc. has defended its focus on the interests of society as well as on profits as business sense, but drew criticism from campaigners for not going far enough.
Asset managers increasingly analyze corporate performance on environmental, social and governance-related issues, to bolster returns as policymakers push for greater action over issues including climate change and diversity.
In his annual open letter, Fink built on themes he has raised in previous January missives to CEOs, calling on them to find a purpose and to take account of issues including climate change as part of stakeholder capitalism, whereby companies seek to serve the interests of all connected to them.
“Stakeholder capitalism is not about politics,” Fink said in the letter late on Monday, entitled The Power of Capitalism.
He said it was not 'woke' and did not have an ideological agenda, but was capitalist in that it was based on mutually beneficial relationships.
Fink, 69, defended BlackRock's stance in engaging with companies on the transition to a low-carbon economy rather than divesting, saying the companies cannot be the “climate police” but should work with governments.
"Divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero,” he said. “And BlackRock does not pursue divestment from oil and gas companies as a policy.”
While Fink had used previous letters to announce concrete actions by BlackRock, including the introduction of a tougher threshold for some funds to invest in coal, the dirtiest fossil fuel, campaigners said the latest letter was a missed opportunity.
“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 with 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," Cushing added.
Nevertheless, overseeing $10 trillion as of Dec. 31, BlackRock is one of the most influential voices in U.S. and European boardrooms, making Fink’s annual letter a must-read.
In Monday’s letter, Fink unveiled plans to launch a Center for Stakeholder Capitalism to create a “forum for research, dialogue, and debate.” The center will help to explore the relationships between companies and their stakeholders, he said.
Fink also said that BlackRock is working to expand an initiative for investors to use technology to cast proxy votes.
“We are committed to a future where every investor – even individual investors – can have the option to participate in the proxy voting process if they choose,” he said.
After years of criticism from activists focused on climate and other ESG issues, BlackRock changed course in 2021 and cast a much more critical set of proxy votes such as backing calls for emissions reports or the disclosure of workforce diversity data.
At the same time the fund manager has faced challenges from conservative U.S. politicians. On Monday, West Virginia State Treasurer Riley Moore said his agency would no longer use a BlackRock liquidity fund, where it kept $21.8 million as of Jan. 6.