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Stakeholder capitalism is not ‘awake’, says BlackRock CEO

(Bloomberg) – BlackRock Inc. CEO Larry Fink warned that companies would be left behind if they don’t adopt sustainable business practices, hitting back at critics saying that considering environmental impact in investment decisions is a politically motivated fad.

“Stakeholder capitalism is not about politics,” Fink wrote in his annual letter to the CEO. “It is not a social or ideological agenda. It’s not ‘wake up’.”

In the decade that Fink is writing his letter, BlackRock has amassed more than $10 trillion in assets, giving it significant stakes in several large companies. It has also been a major beneficiary of the sustainable investment boom: Its portfolio includes $509 billion in fixed assets, more than double the amount from a year ago.

It sees even more on the horizon. But BlackRock’s development and Fink’s high-profile missiles have attracted critics from all sides. On the left, progressives complain that BlackRock and others are not using their financial influence to move more quickly. On the political right, some US states have declared that they will not do business with asset managers, for example, abandoning oil and gas investments.

Read more: How BlackRock made ESG the hottest ticket to Wall Street

Fink used this year’s letter, published on the firm’s website late Monday in New York, to clearly state his position on fossil fuels. “The world will not drop to zero zero by delinking entire sectors or passing carbon-intensive assets from public markets to private markets,” he said. “And BlackRock does not pursue divestment from oil and gas companies as a policy.”

In fact, it does the opposite. The firm’s ESG exchange-traded funds not only hold stakes in fossil-fuel giants like Exxon Mobil Corp. And Chevron Corp., its largest ESG ETF, carries a heavier weighting in 12 fossil-fuel stocks than the S&P 500, according to Bloomberg Intelligence, the research arm of Bloomberg.

Capitalism – not climate – took center stage in this year’s paper, a notable change from the past few years. “We focus on sustainability not because we are environmentalists, but because we are capitalist and trustworthy to our customers,” he wrote, encouraging companies to prioritize long-term gains over short-term results.

He called on companies to make themselves more attractive to employees in a tight labor market, noting that “making workers demanding more from their employers is an essential feature of effective capitalism.”

Fink didn’t mention climate until the last sections of his letter, and then just four times, once in reference to the Task Force on Climate-Related Financial Disclosure and once saying that businesses “can’t police the climate.” He also stressed on the urgent need of fossil fuels to ensure energy supply, saying that ambitious goals take time.

Environmental activists almost immediately registered their dismay, accusing Fink of trying to play both sides. Moira Birs, Amazon Watch’s director of climate and finance, said: “Fink clearly wants to stay above the political fray, but by playing well with those who benefit from the cause of climate change, he made the political choice to reject climate science.” Used to be.” Rainforest Conservation Group based in California.

For BlackRock and others, ESG investing has become a highly attractive strategy. The firm’s vice chairman, Philipp Hildebrand, said in October that BlackRock expected “a major redistribution of capital to sustainable products”.

Fink also prompted shareholders and governments to act. He said governments should provide more guidance on sustainability policy, regulation and disclosure in markets. BlackRock is also working on an initiative that will give customers more power to vote on their proxies.

More from Fink’s letter:

  • The pandemic has fundamentally changed the nature of work, leading to higher turnover and demanding more employee flexibility. “Companies not adjusting to this new reality and responding to their employees do so at their own risk.”
  • Sustainable investment has reached $4 trillion and will continue to grow. “Decarbonizing the global economy is going to create the biggest investment opportunity of our lifetime. It will also leave behind companies that do not adapt.”
  • BlackRock is working to expand an initiative for investors to use the 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 wish.”
  • Fink said he plans to launch a Center for Stakeholder Capitalism to create a “platform for research, dialogue and debate”. The center will help in ascertaining the relationship between companies and their stakeholders, he said.

© 2022 Bloomberg LP

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