As chief executive of the world’s biggest asset manager, Larry Fink began the year with a call to the thousands of companies that the firm holds stakes in: Show how they make a "positive contribution to society."
Now Fink’s BlackRock Inc., overseeing more than $6 trillion of other people’s money, is facing a comparable challenge, stuck between conscience and the implacable demands of the bottom line.
While BlackRock and the rest of the financial industry have targeted Saudi Arabia as a massive revenue generator, they’ve also been compelled to act in the wake of reports that U.S.-based dissident journalist Jamal Khashoggi was allegedly killed inside the Saudi consulate in Istanbul.
“The world for businesses is not black and white,” Fink said in an interview Tuesday.
If history is any guide, human rights have never been too persuasive in Wall Street’s calculus. Libya provides a recent example. Once western governments lifted sanctions on Moammar Qaddafi, bankers quickly rushed in, overlooking the brutality of his regime.
Economic Summit
In Saudi Arabia, the response by industry leaders including Fink, Blackstone Group LP’s Steve Schwarzman and JPMorgan Chase & Co.’s Jamie Dimon has been to pull out of an economic summit in Riyadh next week, an event meant to showcase the reform efforts of Crown Prince Mohammed bin Salman.
But many banks are still sending delegations in the hopes of minimizing the damage to ties to the House of Saud. HSBC Holdings Plc, Societe Generale SA and Credit Suisse Group AG planned to send senior investment bankers, even as their CEOs backed out.
“It’s easy to pull out of the conference because it’s just a conference, and it’s a nice statement,” said John Wilson, head of research and corporate governance at Cornerstone Capital Group. But bigger questions remain, he added. “Speaking strictly from a values perspective, you want to avoid complicity in whatever human rights violations are going on.”
The profits to be made in Libya were a fraction of what’s on offer in Saudi. The crown prince, known as MBS, has launched a plan to open Saudi Arabia up to the world economy. His ambitions include the world’s biggest sovereign wealth fund ($2 trillion) and its biggest initial public offering (oil giant Saudi Aramco).
Blackstone unveiled an infrastructure fund in May 2017 in Riyadh with the Public Investment Fund of Saudi Arabia, known as PIF, agreeing to commit as much as $20 billion on the condition that every dollar would be matched against commitments from other investors.