As Energy Interests Clash, Corporate America’s Green Dream Is Stuck Between BlackRock And A Hard Place
Large asset managers like BlackRock can manage investments for either socially minded clients or financially minded clients — but not both.
By Justin Danhof, Oct. 13, 2022
Hell hath no fury like a comptroller scorned; just ask Larry Fink. The CEO of the world’s largest asset manager, BlackRock, is currently embroiled in an uncomfortable ménage à trois with Texas Comptroller Glenn Hegar and NYC Comptroller Brad Ladner. Embrace fossil fuels, says Texas. Denounce them, says New York. So far, BlackRock has inexplicably tried to do both, hoping that the promises whispered in the ears of certain states wouldn’t be heard by others. But these whispers have now become political rallying cries, and BlackRock is paying the price.
Two weeks ago, the Texas comptroller — who oversees the state’s finances, including regulations affecting its $300 billion pension funds — accused BlackRock of “doublespeak” by “engaging in anti-oil and gas rhetoric publicly yet present[ing] a much different story behind closed doors.” NYC’s Ladner largely agrees, though from the opposite side. He noted an “alarming” “contradiction between Blackrock’s statements and actions” and accused the financial titan of “backtracking on its climate commitments” in a letter the day before.
Mr. Fink’s reasons for backpedaling are clear: Environmental, Social, and Governance (ESG) investing now faces a dual crisis of public backlash and investment underperformance. But as BlackRock backs away from its ESG commitments, states like New York are saying you’d better make good on your promises or face the consequences, thus creating an inescapable bind.
Since 2018, Larry Fink has demanded corporate America embrace so-called “stakeholder capitalism” by considering the broader “societal impact” of its activities. He has called for companies to reduce emissions, increase diversity, and commit to other ESG goals. And the strategy has paid off: BlackRock’s ESG funds went from a niche investment category to over $500 billion in assets under management. “Sustainable assets” more than doubled in 2021 alone.