BlackRock’s Fink, buoyed by record inflows, vows ‘loud’ activism

(Bloomberg) –If BlackRock’s Larry Fink ever had second thoughts about injecting his voice into such weighty issues as climate change and voting rights, he doesn’t anymore.

Emboldened by the record amounts of money flowing into his firm, Fink is among the most prominent leaders in finance to embrace the ideals of stakeholder capitalism, and he’s wielded the influence that comes with overseeing $9 trillion to push others in the same direction.

“I’ve been very loud at what I’m saying and I’m going to be loud again,” Fink, BlackRock’s chairman and chief executive officer, said in an interview at the Bloomberg Green Summit. “Over the last rolling 12 months, we were awarded $527 billion, so our voice is resonating with our clients.”

In his annual letter to CEOs in January, he stressed the need for companies to respond to racial injustice, economic inequality and environmental degradation — all issues traditionally left to government.

Most recently, BlackRock, the world’s largest asset manager, and Fink himself signed a letter defending the right to vote and opposing any “measures that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.” The April 14 letter followed the March passage of a Georgia law widely seen as limiting voter access in the state.

“I believe our voice is imperative in the communities where we work,” Fink said. “If you look at the companies that have voices, companies that have strong stakeholder capitalism as part of their principles, those companies are performing better than the ones who were silent.”

While Fink acknowledges that his is the “largest voice” in the asset-management industry, he’s hardly the lone CEO speaking out. The letter on voting rights was signed by hundreds of corporate leaders, including Merck & Co.’s Ken Frazier, ViacomCBS Inc.’s Shari Redstone and Michael Dell of Dell Technologies.

Corporate activism on social issues has become such a force that Senate Minority Leader Mitch McConnell, responding to the outcry over Georgia’s voter law, warned CEOs to “stay out of politics.” The Economist devoted its April 17 cover to the “Political CEO.”

So far, investors are anything but turned off by Fink’s positions: They pumped a record $171.6 billion of new money into BlackRock in the first quarter.

Tectonic shift

Fink is positioning the firm to benefit from what he calls a “tectonic shift” to climate-sensitive investments. He said clients are reallocating capital to sustainability, and away from the economy built on fossil fuels, at a faster pace than anything he’s witnessed in 44 years on Wall Street.

BlackRock has grown its long-term sustainable assets to more than $200 billion from about $137 billion at the end of the third quarter, and plans to reach at least $1 trillion by the end of the decade. This month, it formed a partnership with Singapore’s Temasek Holdings Pte. to make venture-capital investments in carbon-cutting technologies.

The firm also raised $4.8 billion to buy renewable-power facilities and another $1.5 billion for two exchange-traded funds of stocks poised to benefit from the low-carbon transition.

There’s no shortage of criticism from the other side. BlackRock is regularly slammed for taking a gradualist approach to environmental, social and governance issues — not divesting entirely of coal miners and oil producers, for example, or withholding support for shareholder-led efforts initiatives to improve sustainability.

Activists have held demonstrations in cities including New York, Miami, San Francisco, London and Zurich, imploring BlackRock to use its proxy votes to force changes in leadership at companies that don’t address global warming fast enough.

Even BlackRock’s former head of sustainable investing, Tariq Fancy, has dismissed the firm’s efforts to develop climate data and analytical tools for investors as “marketing” and ESG metrics as a “giant societal placebo.” In a recent interview with Climate & Capital Media, he argued that only government can force changes on the scale required to address the climate crisis.

Private investment

Fink rejects the notion that fossil-fuel companies can’t play a role in the transition to a climate-friendly economy. They could use depleted oil or gas wells to store carbon at a lower cost than other alternatives, he said.

“This is where some people disagree with me,” Fink said. “It’s going to be a combination of old industry that’s becoming new and new technologies that are going to change our world.”

Eventually, he expects all investments will be evaluated for sustainability, just as they’re evaluated for risks such as credit or liquidity. In the meantime, he said BlackRock is voting in favor of sustainability resolutions “with much greater frequency.”

In January, Fink told public companies to adopt standards set by the Task Force on Climate-Related Financial Disclosures, or TCFD, and he urged privately held companies to comply as well. Now, he wants governments to agree on a common set of reporting rules for sustainability so corporate issuers have no incentive to shop around for light-handed regulations and aren’t exposed to increased risk of class-action lawsuits.

He also hopes U.S. President Joe Biden’s ambitious plan for reducing carbon emissions will include private investment, not just public money.

“We don’t have enough opportunity to invest in sustainability in the U.S.,” Fink said. “The question is: When will we see the projects, and how quickly can those projects be permitted and begin construction?”

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