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.
Oct. 27, 2021 — Consumers' Research, an advocacy group, launches an anti-BlackRock advertising campaign targeting the New York and Washington media markets with TV spots and billboards criticizing the firm for doing business in China.
“We cannot let executives like Larry Fink try and tell Americans how to live while simultaneously cozying up to one of the world’s leading human rights abusers,” Will Hild, the group's executive director, says in a statement. The ads are a first salvo in what has become a year-long campaign. The group also launched the websites WhoIsLarryFink.com and aboutblackrock.com.
Jan. 17, 2022 — Fink’s annual letter is all about capitalism and shaped to rebuke claims that BlackRock’s focus on sustainability is politically motivated: “Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke.’” Despite Fink’s efforts to assuage conservatives, the letter still spurs a backlash from red states.
Jan. 17, 2022 — West Virginia Treasurer Riley Moore announces that BlackRock will no longer be allowed to manage money for the state's operating funds. Moore criticizes Fink for being “outspoken in pressuring corporate leaders to commit to investment goals that will undermine reliable energy sources like coal, natural gas and oil under the guise of helping the planet.''
Jan. 19, 2022 — Texas Lt. Gov Dan Patrick urges officials in his state to deem BlackRock hostile to the oil and gas industry. The Republican says the company’s commitment to a net-zero world is inconsistent with the state’s energy interests. BlackRock is “capriciously discriminating’” against oil and gas, Patrick says as he calls for the asset manager to be added to the list of financial firms that “boycott” fossil fuels.
Regulatory Fault Lines | State officials are split on how to regulate public investments and ESG
March 17, 2022 — Arkansas State Treasurer Dennis Milligan strips out about $125 million from money-market accounts managed by BlackRock, citing the firm's “active global political activity” on clean energy and fossil fuels.
May 10, 2022 — Former Vice President Mike Pence criticizes activist investors for pursuing a “radical ESG agenda'' and elevating ''left wing goals'' over business interests. In a speech in Houston, Pence cites BlackRock's support for Engine No. 1's activist campaign at Exxon Mobil Corp. in 2021 that led to the ouster of three board members. Their replacements “are now working to undermine the company from the inside,” Pence says.
May 18, 2022 — Tesla Inc. CEO Elon Musk takes to Twitter to call ESG a “scam” after the electric-vehicle maker was excluded from an S&P Global index that tracks companies on their ESG standards.
June 2, 2022 — In a Bloomberg TV interview, Fink says BlackRock and other money managers shouldn't be held responsible for ensuring their portfolio companies are protecting the planet: “I don't want to be the environmental police.''
June 6, 2022 — BlackRock decides to roll out its own ad campaign, sensing a need to re-introduce the firm to leaders in Washington. The campaign, dubbed “About BlackRock,” seeks to emphasize how it manages retirement plans for more than 35 million Americans and offers low-cost investment products.
June 13, 2022 — BlackRock expands an effort to give its biggest institutional clients the ability to vote their own shares at corporate shareholder meetings to help them “align their voting with their unique investment philosophies or their views.” The asset manager says it would consider how to give retail clients the same ability. Clients with about $530 billion in index equity assets seize the opportunity to vote.
July 20, 2022 — More right-wing personalities take aim at BlackRock, with Glenn Beck — who has more than 800,000 subscribers — posting a video titled “BlackRock uses YOUR MONEY to push ESG & far-left plans.”
Aug. 24, 2022 — Texas determines that BlackRock is one of 10 financial firms that it considers hostile to the fossil-fuel industry, which could cost the firm its business with the state. The company retorts: “This is not a fact-based judgment,” the firm says in a statement. “BlackRock does not boycott fossil fuels — investing over $100 billion in Texas energy companies on behalf of our clients proves that.”
Sept. 7, 2022 — BlackRock pushes back at the 19 Republican state attorneys general: “Given our commitment to those saving for retirement, we are disturbed by the emerging trend of political initiatives that sacrifice pension plans’ access to high-quality investments — and thereby jeopardize pensioners’ financial returns,” Dalia Blass, the firm’s head of external affairs, responds in a letter to the AGs.
Sept. 21, 2022 — New York City Comptroller Brad Lander sends a letter to BlackRock saying that the firm “abdicates responsibility” when it comes to climate change by not asking companies to set specific emissions targets. Lander also sees Fink’s response to Republicans as concerning. “The fundamental contradiction between BlackRock’s statements and actions is alarming,” he writes. The firm needs to “move its portfolio companies to get their businesses in line with a net-zero economy.”
Oct. 5, 2022 — Louisiana pulls $794 million from BlackRock funds, pointing to the company’s views on ESG investing as the chief reason. The assets will be liquidated by year-end. Two weeks later, Missouri follows suit with $500 million. “Your blatantly anti-fossil fuel policies would destroy Louisiana’s economy,” state Treasurer John Schroder said in a letter to Fink.
Nov. 8, 2022 — Republicans are poised to regain control of the House of Representatives and promise to use that power to scrutinize ESG investing. “Republicans on the House Financial Services Committee will be exercising rigorous oversight of both regulators and private sector asset managers who have politicized capital allocation that damages American workers, retirees, and discriminates against U.S. energy producers,’’ says Representative Andy Barr of Kentucky.
Dec. 2, 2022 — Florida pulls $2 billion from BlackRock — the biggest withdrawal yet over ESG. “Using our cash to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for,” Jimmy Patronis, the state’s chief financial officer, says in a statement. “It’s got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do.”
This article was provided by Bloomberg News.