Is BlackRock’s Larry Fink blowing it for the climate?
An earlier version of this story misspelled the name of BlackRock executive Mark Wiedman. Just after Thanksgiving, dozens of state lawmakers packed into a hotel ballroom in downtown Washington to plan their next assault on a movement that pushes companies to confront global warming and social injustice. Their attacks on woke investing were already sticking in red-state capitols and on Fox News, but the group wanted a target with a human face. Every big problem needs a face and a name, the speaker said at the private event hosted by the conservative American Legislative Exchange Council. The worst offender out there is BlackRock and Larry Fink. Since then, the attacks have been unrelenting. And Fink, founder of the worlds largest investment and risk management firm, has throttled back on the urgency with which he pushes companies to confront climate change. The resolute language in public letters to CEOs is gone. And BlackRock executives have begun waving away the climate targets they once committed to helping the world meet as irrelevant to the current moment. The conversation with clients has moved away from ... 2050 targets, said Mark Wiedman, who heads global client business at BlackRock, referring to the U.N. goal of zeroing out emissions by 2050 to stop catastrophic warming. Its moved away from [climate] alliances. Its moved toward actually putting money to work that will profit from and drive the transition. BlackRock frames this as an obvious evolution. Climate-focused regulators in blue states and D.C., however, see a dangerous abandonment. BlackRock sits on $9 trillion in assets from pension funds, governments , universities and companies. It is bigger than better-known rivals Vanguard and Fidelity. Its billionaire leader has unparalleled influence over the direction of the economys largest companies and used his position to pioneer investing that factors in the environmental and social footprint of businesses. He is not accustomed to losing control of the narrative. Yet Finks once-robust warnings to CEOs about the peril of ignoring climate risk emphasized by BlackRock in its pursuit of what is called environmental, social, governance, or ESG now have BlackRock rivaling Disney and Anheuser Busch as the favored target of a conservative anti-woke movement shaping the 2024 election campaign. If you told me two years ago that there would be a political movement focused on attacking critical race theory, gas stove bans and ESG investing, I would have said you are standing too close to your gas stove, said Brad Lander, the comptroller of New York City. But they have made ESG investing part of the culture war. How clever to make Wall Street the target with their pretend populism, when they are really doing the bidding of fossil fuel companies. He wrote the book on crushing wokeism. Now hes running for president. It is questionable whether haranguing corporate policies will help the GOP retake the White House. But what is clear is that the way Fink navigates this storm could determine whether the world achieves its goal of limiting the most disastrous effects of climate change. Lander is among many who say he is flailing. Fink says nothing has changed. But the companys portfolio these days does not reflect the ambitions he laid out when BlackRock launched its climate crusade in 2019. BlackRock is the worlds second biggest investor in fossil energy, according to the German NGO Urgewald, which also reports that no financial firm invests more in coal developers. BlackRock argues that its investments are consistent with a commitment to a responsible and orderly rather than recklessly rushed energy transition, as well as the realities of global energy needs after Russias invasion of Ukraine. Larry cant come out and say, We were wrong. We should not have gone so far over our skis, even as BlackRock is regressing, another financial industry leader with clout rivaling that of Fink said, speaking on the condition of anonymity to be candid. He has to publicly defend his business model. But at the end of the day, BlackRocks objective is to be the biggest asset manager in the world. That means he needs to be selling people the products they want, not social policy. We are now seeing the pendulum swing back to the reality of unintended consequences for companies like BlackRock making big, bold, definitive statements, the executive said. This is much bigger, though, than one firms quest to dominate the financial industry. Decades into the effort to contain global warming, America is more dependent than ever on companies like BlackRock for solutions. Without a national policy requiring industry to embrace a carbon-free future, the country is left with a patchwork of regulations and voluntary programs often reliant on Wall Street pressure. Banks and giant fund managers have landed in the role of de facto climate regulators amid their worries that warming threatens to destabilize the firms they invest in. Fink, who declined several interview requests, initially seemed to relish his role in the ESG movement. The company is the most prominent member of a key U.N. initiative to reach net zero emissions by 2050 called the Net Zero Asset Managers Initiative, a consortium of big financial firms representing tens of trillions of dollars. Fink mentioned climate 29 times in a 2020 letter to CEOs. Climate risk is investment risk, he wrote. In the near future and sooner than most anticipate there will be a significant reallocation of capital because of it. Larry was clearly saying if government is not going to fix this problem, we will help push them in the right direction, said Peter McKillop, a former managing director in the communications division of BlackRock. It was considered exciting and morale-boosting. Who wouldnt want to work there? Some senior executives inside the company, though, worried Fink was setting very public targets for ESG impossible for a firm of its size to meet without alienating clients and diminishing investment returns. For better or worse, billionaires now guide climate policy There was this naive assumption that if Larry Fink and a couple of others would get out there and talk all this ESG and demand all these requirements, the oil industry just would go along, McKillop said. Instead, he poked the bear. The oil industry is going to fight this to the death. And it has a war chest of tens of billions to do it. Vanguard, another big financial company that had signed on to the Net Zero alliance, bailed on the effort as the conservative backlash mounted. Large investment banks threatened to bolt from a parallel U.N. effort, forcing a compromise that scrapped a requirement that members quickly phase out fossil fuel investments. But Finks moves are what Wall Street and Washington are watching most closely, as he is, in the words of one executive, the financial industrys 800-pound gorilla. The billionaires clout was solidified during the Obama administration, which leaned on him heavily as it sought a path out of the mortgage crisis. The Trump White House would later call on Fink for help stemming the economic meltdown that accompanied the onset of the pandemic. Trump praised Fink at a 2017 White House meeting for doing a great job for me. He managed a lot of my money and, I have to tell you, he got me great returns. By the time President Biden took office, Fink had consolidated considerable power in Washington. His company had secured major government contracts and persuaded regulators not to impose on it the Great Recession-era restrictions and constraints that now apply to other too big to fail financial institutions. It pushed prominent progressives to demand BlackRock executives be blacklisted from White House jobs. They were ignored. Biden would appoint one BlackRock executive to be his top economic adviser, and another to be deputy secretary of the Treasury. A BlackRock alum would also become the vice presidents top economic adviser. The son of a shoe store owner and English professor in Californias San Fernando Valley, Fink has mostly been on a rocket ship of success since the mid-1970s, when he drifted into a job at the firm First Boston trading mortgage-backed bonds. Within two years, he was running the department. He would become the youngest member of the firms management committee by age 31. Fink joined Blackstone in the 1980s but parted ways with the equity firm to form BlackRock, and the new companys savvy at gauging and navigating risk propelled it into a breakout star following the financial meltdown of 2008. BlackRock was put in charge of managing tens of billions of dollars in toxic assets that had come under federal control, including the entire portfolio of the failed institution Bear Stearns. The firm has spent millions of dollars on lobbying and campaign contributions to both major parties. By the time a 2013 Treasury Department report noted that BlackRock had grown so big that it could present a risk to the U.S. financial system absent more intense regulatory scrutiny, the firm had influential allies on Capitol Hill steering the Obama administration away from taking action. BlackRock is now so large, according to a paper published in the Boston University Law Review, that it and just two other companies could control more than a third of shareholder votes in the S&P 500 within five years. Its formidable size made its embrace of ESG all the more significant. Even champions of ESG say it is an imperfect vehicle: amorphous, misunderstood and easy to attack. The term was conceived two decades ago at the United Nations and has since come to encompass everything including promoting diversity in boardrooms and confronting corporate environmental impacts. The problem is it is a mash-up of so many issues, said Doug Chia, a fellow at the Center for Corporate Law and Governance at Rutgers Law School in New Jersey. Not all of them apply to every company. But it became a perfect pretext for politicians who want to talk about the culture war and woke agendas. Tariq Fancy, BlackRocks former chief investment officer for sustainable investing, said the irony is that ESG had been largely hollowed out before the right latched onto it, with firms slapping the label onto run-of-the-mill funds to mislead progressive investors. He compared ESG to the lifeless body in the movie Weekend at Bernies, with conservative activists propping it up to give the appearance that it was a living menace. As the culture wars drifted increasingly toward corporate policies, it was perhaps inevitable Fink would wind up in the political crosshairs. It is not business the way they are doing it, Fink said of the campaign against him, speaking this year from the stage of the annual World Economic Forum meeting in Davos, Switzerland a platform preferred by the billionaire who brands himself a globalist. In the first time in my professional career, the attacks are now personal. The group Consumers Research has spent more than $4 million attacking BlackRock. Its ominous ads accuse Fink of using his clout to lock Americans into a hellscape of high energy costs while he endangers the nation with his own lucrative business deals in China. Its a familiar playbook, similar to the one the right uses against progressive billionaires George Soros and Mike Bloomberg: Elitist globalists expand their power by taking away your freedom. Like Fink, those two men are Jewish. Will Hild, executive director of Consumers Research, calls charges the campaign feeds into antisemitic tropes completely baseless, noting that his wife and two sons are Jewish. Hild confirmed to The Washington Post that he promoted the targeting of Fink at the private event in Washington, captured on a recording given to The Post by the investigative journalism project Documented. Larry Fink is running a massive scam against the American consumer, Hild said in an interview, We didnt think it was fair for him to get away with that simply because no one knew his name. We are working hard to make sure every American household knows that the reason prices are going up is because of Larry Fink and BlackRock. BlackRock is accused by critics on the right of a fervor for green energy that pushed corporations into costly initiatives, and an obsession with ESG that played into its clients losing $1.7 trillion when the markets slid in early 2022. The points are in dispute. BlackRock clients were not the only ones who took such a hit in 2022, and the extent to which ESG policies help or hurt returns or impact the cost of products companies manufacture is a matter of intense debate among experts. The attacks are revealing how unprepared BlackRock was for this battle. When BlackRock announced that it was launching a major marketing push called About BlackRock to counter the narrative of the anti-woke activists, it neglected to register that domain name. Hild grabbed it. Aboutblackrock.com now houses videos and writings that savage Fink. Hilds nonprofit is part of a well-funded network of conservative advocacy groups taking aim at climate-conscious investing, including the Heritage Foundation, the American Legislative Exchange Council and the State Financial Officers Foundation. A central figure in the movement is Leonard Leo, the co-chairman of the Federalist Society whose decades-long effort was foundational to the sharp right turn of Americas judiciary. Its most visible spokesman is author and investment manager Vivek Ramaswamy, a relentless BlackRock critic who has made the evils of ESG the centerpiece of his recently launched presidential campaign. It has created an unprecedented public relations menace for Fink. The firm is now a target of state and federal antitrust investigations , and red-state leaders are vowing to divest as much from it as they can. They have so far moved $4 billion out. Why is Disney suing Florida Gov. Ron DeSantis? Fink is a creature of Wall Street, where success is judged by the numbers. Every dollar BlackRock lost in red-state government money over the last year has already been replaced by many more dollars of new investment from other clients. The reality is we are winning more share wallet than any company in the world right now, Fink told CNBC last month. Our clients are speaking loudly by the amount of money they are awarding us. But the broader battle over climate change is bigger than the financial gains of one company, and Fink has stopped being a reliable leader on that front. He is not using his voice in a way young people will thank him for 40 years from now, Fancy said. The problem is that he cant solve this crisis, but he is leaving the impression that he can. He is not being honest about how the system works. If he were being honest, it would lead to regulations that are not in his interest, and more taxes that would lessen the income of billionaires like him. Hes engaged in an intellectual fantasy. BlackRocks Wiedman counters that Fink has long been calling for government to engage more aggressively, as it is not the role of an asset manager to set policy. We cant use our clients money to commit to goals they have not given us, he said. By 2021, BlackRock supported nearly half the shareholder proposals pushing for lower emissions at public companies, including playing a major role in propelling more climate-conscious directors onto the board of ExxonMobil. But it backed less than a quarter of such shareholder measures last year, and it has signaled that it will take an even more selective approach this year. The company says what changed is the quality of the proposals, which have become too prescriptive and constraining on management and often ignore how the war in Ukraine has reshaped energy needs. BlackRock is among at least a dozen big financial firms that warned investors in their latest annual reports that the backlash against sustainable investing has become a business risk. Fink no longer talks about the issue with the bravado of a change agent. It is not the role of an asset manager like BlackRock to engineer a particular outcome in the economy, and we dont know the ultimate path and timing of the transition, he wrote in his latest public letter to shareholders , released in March. They are walking severely back from recognizing climate risk is financial risk because a few red-state treasurers and attorneys general doing the bidding of their fossil fuel donors have launched a culture war and are using BlackRock as a target, Lander said. There is one point, though, on which Lander, BlackRock and even Consumers Research agree: Leaving climate policy to the whims of a billionaire is a fraught path. It would be far better if government stepped up to set clear expectations for the transition to net zero, Lander said. What is expected of banks? What is expected of investors? What is expected of financial companies? Unfortunately, he said, there is no reason to be optimistic that is going to happen.