The new chairman’s letter from BlackRock CEO Larry Fink gives less emphasis to climate risk and environmental, social and governance (ESG) investments than past letters — but doesn’t play down the substance, Andrew writes.

Why it matters: As the head of the world’s largest asset manager, Fink’s letters are widely taken as a signal for how the financial community is thinking, and how policy makers may need to respond.

Driving the news: His latest letter, out Wednesday, departs from the past several years, which focused largely on the need to incorporate climate risk, ESG concerns and broader corporate responsibility issues.

  • BlackRock is a top target of right-wing interest groups and Republican lawmakers, who have accused the firm — and specifically Fink — of pushing a “woke” investing trend that does not serve investors’ interests.
  • Recently, several states have moved to pull money out of BlackRock funds, alleging the firm boycotts fossil fuels, which the company rebuts again in the new letter by touting its natural gas investments.

Between the lines: Fink’s latest dispatch deemphasizes ESG investing. In fact, the term ESG does not appear anywhere in the letter.

  • The energy transition concerns are not raised until paragraph 18, and the word “climate” doesn’t appear until the eighth page of the lengthy letter. Even when it does, climate is only used five times.

Zoom in: Still, the letter indicates the company is not backing away from climate concerns.

  • “For years now, we have viewed climate risk as an investment risk. That’s still the case,” the letter states.
  • Fink discusses the investment opportunities associated with the energy transition, potential financial repercussions from climate change-related extreme weather events and the need for BlackRock’s portfolio companies to disclose climate-related risks.
  • He positions BlackRock as offering choices to clients. He also makes clear the firm does not direct companies it invests in to take certain actions on climate change or other issues.

Yes, but: Fink’s statement that asset managers including BlackRock should not set policy or “be the environmental police” contrasts with his 2020 letter to investors.

  • That letter stated: “BlackRock does not see itself as a passive observer in the low-carbon transition. We believe we have a significant responsibility — as a provider of index funds, as a fiduciary, and as a member of society — to play a constructive role in the transition.”

What they’re saying: “[BlackRock is] the 800 pound gorilla here, and they’re definitely walking a tightrope,” Daniel Firger, managing director of Great Circle Capital Advisors, a climate finance consultancy, tells Andrew.

  • “It’s heartening to see the world’s largest asset manager not walk back from its very clear fiduciary mandate to think about climate-related risks,” he said.

Share this story