Why is BlackRock’s Fink now “ashamed” of ESGs?
Larry Fink, the CEO of the large investment firm BlackRock, said he was ashamed of the public debate around ESGs. In the United States, the polarization between right and left on sustainability is extreme. Here are statements and promises
Larry Fink, the chief executive officer of BlackRock, the world's largest investment firm, said he has given up using the term ESG because it is being "weaponized" by politicians and he is "ashamed" to be involved in this type of conversation.
WHAT ARE ESG AND WHO CRITICS THEM
ESG refers to those factors that evaluate the environmental , social and management impact of an investment. In recent years, following the greater attention to "sustainability" and to the profit opportunities linked to the ecological transition, this acronym has assumed great importance within the world of finance, but it has also attracted major criticism .
Those who contest ESG argue that attention to these principles is jeopardizing the economic returns of investments, making them fade into the background when instead they should instead represent the priority objective of financial companies.
Last year this interpretation was somewhat strengthened by the energy crisis. The increase in oil prices has in fact damaged the performance of many ESG funds which had detached themselves from assets linked to the oil & gas sector, responsible for the emission of large quantities of carbon dioxide into the atmosphere.
WHY FINK'S WORDS ARE IMPORTANT
Larry Fink's words and actions matter because BlackRock has $9.2 trillion in assets under management: the company's approach to investing inevitably affects the entire market. But – as Axios points out – it is very likely that the CEO's latest ESG statements will fuel much controversy.
On the one hand, there are conservative circles hostile to ESG and so-called “ woke capitalism” (i.e. activist and radical left, simplifying) who accuse BlackRock of boycotting the oil sector. Several conservative US states, governed by the Republican Party and often linked to the oil and gas industry, have imposed restrictions on the company. For example, West Virginia banned it from doing business with state entities because of its sustainability policy; similarly, Texas has prohibited local agencies and governments from contracting there; Florida withdrew about $2 billion from BlackRock funds.
But BlackRock is also criticized by the progressive world. Representatives of the Democratic Party and environmental organizations such as the Sierra Club, for example, want society to embrace climate action with greater conviction and ambition: BlackRock continues to invest in assets related to fossil fuels, being a shareholder of large oil companies such as ExxonMobil and ConocoPhillips as well as major US liquefied gas exporters .
“I AM ASHAMED TO BE PART OF THIS CONVERSATION”
“I will not use the word ESG because it has been misused by the far left and far right. I'm ashamed to be part of this conversation,” Fink said during last Sunday's Aspen Ideas Festival, referring precisely to the political polarization in the United States around ESG. He spoke about Florida Gov. Ron DeSantis ' decision to withdraw $2 billion from BlackRock and acknowledged its impact on the company's 2022 results; however, he specified that 2022 was the best year for BlackRock, with net flows of 200 billion from American customers.
Fink is convinced of the need to take into account climate risks and their economic impact in investment strategies. In fact, for some years now, in his letters to international managing directors, he has been dwelling a lot on the consequences of climate change and on the need to speed up the transition to low-emission energy. “When I write these letters,” he explained at the Aspen Ideas Festival, “I never intended them as a political statement […]. They were written to identify long-term problems for our long-term investors."
At the same time, however, Fink said he "believes in conscientious capitalism," and therefore in attention to environmental sustainability and good governance.
Already last January, during the Davos World Economic Forum, Fink declared that an "ugly" narrative had developed around ESG investments that "is creating great polarization" in US society. He had also anticipated that in the next letters to company executives he would concentrate on the "concept of hope". BlackRock, he said, "is a company trying to sell hope because who would bet on a 30-year bond unless they believe that 30 years from now something will be better [than today ] ?"
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/larry-fink-blackrock-esg/ on Sun, 02 Jul 2023 05:20:19 +0000.