BlackRock’s Larry Fink on Monday defended his firm’s push to factor environmental concerns into its investment strategy, even as many suggested the investment giant hasn’t gone far enough in addressing climate change.

 

Shareholder activists had been trying to persuade BlackRock — which frequently controls the largest bloc of shares in major public corporations and has $10 trillion in assets under management — to use its clout to press for measures that might slow down climate change and persuade companies to reach net-zero emissions.

“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke,’ ” Fink said in the letter.

 

The BlackRock annual letters to chief executives and shareholders have become closely watched since 2012, when Fink publicly criticized his fellow CEOs of pursuing short-term strategies. He also took aim at what he saw as excessive dividends and share buybacks.

In 2016, Fink wrote that “over the long-term, environmental, social and governance (ESG) issues — ranging from climate change to diversity to board effectiveness — have real and quantifiable financial impacts.”

A growing number of critics say BlackRock’s own business falls short of Fink’s lofty ideals. The asset manager still invests in a broad array of fossil fuels and other industries with high greenhouse gas emissions. In December, BlackRock teamed up with a Saudi asset manager to pay $15.5 billion to buy and then lease back pipelines to Saudi Aramco.

 

“BlackRock continues to be one of the largest shareholders in virtually every company on Earth, including most of the companies which are driving the climate crisis,” said Diana Best, a senior strategist with the Sunrise Project, a nonprofit group. “What they say really matters.”

 

Best said Fink did not articulate concrete steps companies should take to reduce their carbon footprint. BlackRock should tell firms there will be consequences for not taking those steps, including divesting from those firms, she said.

Fink has defended his strategy by saying that engaging with these companies is the best way to get them to improve their practices. In 2021, BlackRock successfully backed three dissidents for the ExxonMobil board of directors, hoping to improve the company’s financial and climate strategies. On Tuesday, ExxonMobil announced plans to slash greenhouse gas emissions to net zero by 2050 in its own operations and by 2030 in the Permian Basin, where 40 percent of its net oil and gas production is located.

 

“Divesting from entire sectors — or simply passing carbon-intensive assets from public markets to private markets — will not get the world to net zero,” Fink said in his letter this week. “And BlackRock does not pursue divestment from oil and gas companies as a policy.”

Fink also cautioned that private businesses could not be expected to do too much. This came after the November international climate summit in Glasgow, Scotland, that included a large number of businesses. International climate negotiators sought to persuade businesses to take steps to slow climate change.

“Capitalism has the power to shape society and act as a powerful catalyst for change. But businesses can’t do this alone, and they cannot be the climate police,” Fink said. “That will not be a good outcome for society. We need governments to provide clear pathways and a consistent taxonomy for sustainability policy, regulation, and disclosure across markets.”

 

BlackRock has emerged as a leader in sustainable investing, one of Wall Street’s fastest-growing businesses. One study last year by the Global Sustainable Investment Alliance found that over $35 trillion, or more than 1 in 3 of the world’s professionally managed dollars, is now invested in sustainable funds.

 

But because there are no regulations around these terms in the United States, it’s unclear how much of those funds are supporting social or environmental purposes. BlackRock’s U.S. Carbon Transition Readiness ETF, launched last year, includes holdings in Exxon, Marathon Petroleum, Chevron and other fossil fuel companies. BlackRock also offers funds with no fossil fuel companies.

“We are clear about the investment strategies and sustainable outcomes our funds are designed to achieve,” BlackRock spokesman Ed Sweeney said in a statement. “BlackRock believes greenwashing is a risk to investors, which is why we support regulatory initiatives to enhance the transparency of sustainable funds’ investment mandates and outcomes.”

 

In his letter this week, Fink said BlackRock would continue to press companies to pay attention to climate change because it made financial sense.

 

“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients,” he said. “That requires understanding how companies are adjusting their businesses for the massive changes the economy is undergoing.”

Fink said that BlackRock would ask companies to set short-, medium- and long-term targets for greenhouse gas reductions. “These targets, and the quality of plans to meet them, are critical to the long-term economic interests of your shareholders,” he said.

“As your industry gets transformed by the energy transition, will you go the way of the dodo, or will you be a phoenix?” Fink said.