Walking the Talk
BlackRock's Fink Expounds on Need for Decarbonization, But Not Divestment

This week, BlackRock CEO and Chairman Larry Fink released his annual letter to CEOs — which has come to be seen as a harbinger of the investment world’s focus each year.

As in recent years, Fink discusses companies’ role in addressing societal issues — including the climate crisis. Past letters have introduced coal-exclusion policies or frameworks intended to attempt to lower BlackRock’s own emissions. This year’s letter (which appeared without the letter to clients that has been traditionally paired with it in past years), however, steers clear of this theme entirely. Fink highlights the importance of authentic and transparent CEO engagement with stakeholders, particularly employees; and announces the launch of BlackRock’s Center for Stakeholder Capitalism — designed to “help us to further explore the relationships between companies and their stakeholders and between stakeholder engagement and shareholder value.” But he does not discuss any new strategies to concretely decarbonize the asset manager’s portfolio or reduce its massive exposure to climate-destructive companies.

Instead, Fink seems to answer the growing number of activist organizations that have criticized BlackRock’s failure to walk its climate-action talk — its refusal to divest from coal and other fossil fuels while Fink proselytized the need for its clients to embrace and scale clean energy for a net-zero future. While Fink asserts that “the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime. It will also leave behind the companies that don’t adapt, regardless of what industry they are in,” he also details the importance of a slow clean-energy transition, to ensure that people continue to have access to reliable and affordable energy sources. A valid point, but he goes so far as to say: “Any plan that focuses solely on limiting supply and fails to address demand for hydrocarbons will drive up energy prices for those who can least afford it, resulting in greater polarization around climate change and eroding progress. Divesting from entire sectors — or simply passing carbon-intensive assets from public markets to private markets — will not get the world to net zero.”

Predictably, Fink’s more-tepid-than-usual stance on the need to end dirty energy has irked environmental activists.

“In 2022, few things rise above the political fray, but climate science has to be one of them,” says Casey Harrell, Senior Strategist with The Sunrise Project. “In his letter, Larry Fink is trying to be everything to everyone — and that is not true leadership. If he will not stand up to climate skeptics, what will happen when some of the heavy-emitting companies that BlackRock owns are, to use his words, ‘dodos’ instead of ‘phoenixes’? This letter does not invoke confidence that Larry is the leader we need him to be, and we hope that the client letter will have much more detail and much more specific ambitions about what BlackRock will do.”

Continued support for the companies literally fueling the climate crisis

The world’s largest asset manager, BlackRock has recently surpassed $10 trillion assets under management. The Wall Street behemoth remains one of the leading investors in fossil fuels and companies driving deforestation: Analysis conducted by Universal Owner shows that only 10 percent of BlackRock’s assets under management are responsible for 85 percent of its portfolio emissions.

The IPCC and IEA have made it clear: To keep the earth from warming more than 1.5°C, we must stop investing in new fossil fuel infrastructure immediately. But according to a report by Reclaim Finance and Urgewald, BlackRock holds $85 billion in coal companies, $24 billion of which are invested in companies planning to expand their coal business. While Fink highlights sustainable investments having reached $4 trillion globally, he fails to mention that as of January 2021, worldwide investments in coal alone surpassed $1 trillion. And in late 2021, BlackRock finalized a $15 billion deal with Saudi Aramco to acquire 49 percent of the oil & gas major’s gas pipeline subsidiary.

“There’s not much to see here other than more hot air from a would-be climate leader,” says Ben Cushing, Fossil-Free Finance Campaign Manager with the Sierra Club. “Larry Fink’s latest letter to CEOs is just another rehashing of the same vague rhetoric, without any meaningful new commitment to actually help lead the necessary transition to a climate-safe future. Fink is insisting on continuing to prop up dirty fuels like fracked gas and peddling the outdated and dangerous view that gas has a place in the energy transition, despite the scientific consensus that we need to stop expanding fossil fuels immediately. Will this be yet another missed opportunity for BlackRock or will it finally hold polluters and laggards accountable?”

There’s no arguing with Fink when he says, “Delivering on the competing interests of a company’s many divergent stakeholders is not easy.” But at a time when more and more consumers are ditching banks that finance fossil fuels, fellow asset managers such as Vanguard are being called out on their lack of climate action, and banking giants such as HSBC are making definitive commitments to end coal financing, continued hedging could see BlackRock move from leader to laggard.