During BlackRock’s annual shareholder meeting on Wednesday, CFACT President Craig Rucker posed a question to Chairman and CEO Larry Fink on the matter of the company’s recent setbacks in the area of ESG financing.
During a Q&A session after the voting adjourned, Rucker said: “Numerous states like Texas, South Carolina, Florida, and Louisiana are pushing back against ESG criteria and taking action to divest from BlackRock. Why doesn’t BlackRock change course and repudiate the divisive nature of ESG criteria, admit it erred in ever getting involved with it, and move on?”
Rucker’s question was joined by two other questions of a similar tone in nature, so the moderator chose to link them together and pose a single question to Mr. Fink:
[Moderator] “We’ve received a number of questions from shareholders including Roger Flanagan, Mark Charles, Craig Rucker and others on why BlackRock uses its voice around various issues like ESG and racial equity which they believe are personal and political preferences. Larry can you comment on this question?”
[Larry Fink] “Thank you for this question. Let me start off and say we are a fiduciary to our clients. The way we manage, belongs to our clients who entrust us to manage their investments and to help them prepare for the future. Our fiduciary duty is to serve each and every client by seeking the best risk adjusted returns within the guidelines they set for us. When we deliver a value for our clients we also create more value for our shareholders. We serve our clients who have a wide range of investment objectives, preferences, time horizons, risk tolerances, and we offer them choice to help them reach their investment goals. And we manage their assets consistent with their objectives and their guidelines. Part of supporting our clients includes speaking out on issues important to their investments. The global energy transition is one example of an important investment risk and opportunity that our clients expect us to navigate their portfolio through. We invest in companies on behalf of our clients, in accordance with the mandates they have given us. It is our client’s money, not ours. We are not involved in the management of companies. Our interest is seeing companies create sustainable, durable, long-term value for shareholders, which include our clients. I believe our approach is resonating. While most of our peers have had net outflows in 2022, clients entrusted BlackRock to manage nearly $400 billion of long-term net assets including $230 billion alone in a [inaudible] in the United States. This momentum continues in the first quarter of 2023 with clients entrusting us with more than $100 billion in net new assets. These industry leading results reflect a strong endorsement by our clients of the choices we make, the advice we provide, the long term performance record we have delivered, and the fiduciary standard that we uphold to each and every client.”
From CFACT’s perspective, this response amounted to an artful dodging of the question. Mr. Fink seemed to be responding to people accusing BlackRock of misusing clients’ money and placing it in areas they might disapprove of. He made clear they don’t do such. Our response is…Good for BlackRock. Of course, no one is accusing BlackRock of doing that.
What people are worried about is BlackRock’s touting ESG criteria as a basis for scoring good vs. bad investments. In doing so they are, in fact, strongly influencing the options as presented to their clients in a twisted way. For example, Mr. Fink has stated in comments to shareholders in the past that he embraces the notion of a climate emergency and need to de-carbonize energy. So when Mr. Fink says, “The global energy transition is one example of an important investment risk and opportunity that our clients expect us to navigate their portfolio through,” it’s important to remember he approaches the issue from a world view not dissimilar to Al Gore. He’s free to that opinion, of course – so long as that opinion of a need for “climate action” doesn’t find its way into BlackRock’s ESG criteria, and then used to score good vs. bad investment decisions for clients. CFACT believes market performance, not politics, should be the principal criteria driving investment decisions.
As for Mr. Fink’s comment about “We are not involved in the management of companies”, well, tell that to the three ex-chairmen at Exxon who were removed from their offices when BlackRock joined forces with Engine No. One in 2021 to expel them. And why? Not because of incompetence, but because of the climate crusaders wanted to make a political point. If BlackRock is not sending a message to companies who step out of line with its climate objectives “be careful”, it’s hard to say who is.
CFACT also took occasion at BlackRock’s annual shareholder meeting to vote against a proposal put forward by climate activists. It called for BlackRock to produce a report specifying how the company can use its proxy voting to engineer de-carbonization in the economy. The proposal, fortunately, was defeated with around 90% of the shareholders voting against it.