BlackRock Inc. and Chief Executive Officer Larry Fink spent the past several years championing investment strategies that focus on a now-ubiquitous and tormented acronym: ESG.
As a result, the asset-management behemoth has become a leading corporate voice in the environmental, social and governance movement.
While that has been a boon for BlackRock, linking its brand to a do-gooder ethos — and helping to generate fees on the hundreds of billions of assets it manages under its myriad "sustainable" funds — the backlash has been ferocious.
BlackRock’s push into ESG transformed the firm into a political punching bag for politicians of all stripes. On the right, Republicans like Florida Governor Ron DeSantis have blamed ESG for hurting the fossil-fuel industry, and claimed that BlackRock is turbocharging America's "woke" culture. Meanwhile, Democrats including US Senator Elizabeth Warren of Massachusetts have criticized the firm for not doing enough.
"He's kind of caught in the middle,’’ New York State Comptroller Thomas DiNapoli said of Fink during an interview Wednesday with Bloomberg reporters and editors. “He's getting it from the left and he's getting it from the right."
The criticism has reached a fever pitch. A Texas Senate committee subpoenaed BlackRock for documents and asked for executives to attend a hearing Thursday.
In August, 19 Republican state attorneys general signed a letter accusing New York-based BlackRock of favoring its ESG commitments at the expense of pension fund profits. Since then, some states, including Louisiana, have started to pull money from BlackRock funds. In December, Florida made the biggest withdrawal yet, pulling $2 billion.
Fink, in response, has struggled to find a middle ground that would keep him and the firm out of the crossfire. He has emphasized BlackRock’s commitment to fossil fuels, calling them a necessary bridge to a clean-energy future, and noted that the asset manager has sizable investments in oil rich regions — from Texas to Saudi Arabia.
Here’s a timeline detailing some of the key moments in BlackRock’s evolution as an ESG powerhouse:
Jan. 16, 2018 — Fink cites ESG metrics in his annual letter to chief executive officers for the third consecutive year. He writes that corporate board members are smart to raise such issues in order to ensure sustainable growth. “Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce?”
Jan. 16, 2018 — Billionaire investor Sam Zell questions Fink’s ability to sway corporate America. “I didn’t know Larry Fink had been made God,” he says in an interview with CNBC. “I just wonder whether America is really ready for Vanguard and BlackRock to control the New York Stock Exchange.”
June 5, 2018 — A global group of 10 environmental organizations — including the Sierra Club — launches a campaign dubbed “BlackRock’s Big Problem.” Seeking to pressure the firm over its impact on the environment, the group accuses the asset manager of being one of the world’s biggest investors in “climate destruction.” In a letter to Fink, the group’s founders write that BlackRock’s efforts to consider environmental consequences are a good start, but “fall well short of what is required.”
Jan. 17, 2019 — Fink takes another step to embrace ESG in his annual letter, titled “Purpose & Profit.” He notes that investment preferences are changing and that millennials will increasingly demand such products in their portfolios.
May 10, 2019 — BlackRock’s latest sustainable fund debuts with a big position from Finland's largest pension insurance company, which pumps $800 million into the new ETF. The fund tracks top ESG performers while excluding companies involved in industries including tobacco, gambling and nuclear power.
Jan. 14, 2020 — This year’s letter proclaims a “fundamental reshaping of finance,” an ambitious proclamation that strikes an urgent note for investors with the strongest warning yet on the climate crisis. “In the near future — and sooner than most anticipate —there will be a significant reallocation of capital,” he writes. “Climate change has become a defining factor in companies’ long-term prospects.”
Feb. 10, 2020 — Climate protesters barricade BlackRock’s office in Paris for more than an hour and graffiti its walls. Youth for Climate France claims responsibility and said the protest was meant to call attention to the firm’s investments in companies that the group deems harmful to the environment.
June 30, 2020 — The US Department of Labor proposes a rule that would change the Employee Retirement Income Security Act of 1974 to require those overseeing pension and retirement plans — including BlackRock — to focus exclusively on clients’ economic interests. BlackRock pushed back, calling the proposal “overly prescriptive and burdensome.”
Sept. 30, 2021 — BlackRock’s sustainable funds for long-term investment reach a record, topping $32 billion in total net flows for the third quarter.