In his 2020 letter to CEOs, Larry Fink, the chairman and CEO of BlackRock, the world’s largest asset manager, proclaimed that “climate risk is investment risk.” A more accurate read, however, is that for companies like BlackRock, climate risk is proving to be a valuable investment opportunity.
Today banks, investors, and asset managers have positioned themselves to make money no matter how — or whether — countries finally take meaningful steps to stop climate change. In fact, for some of the world’s largest, most powerful, and most globally integrated companies, the climate crisis is a win-win-win situation.
If governments take little or no action, these companies will win simply by continuing to do what they already do. Companies will invest in green industries and technologies, and they’ll sell “environmental, social, and governance,” or ESG, investment products to those who want to feel better about how their money makes money. But these firms will also continue to invest in oil, gas, and coal, and offer investment services that embrace dirty industries.
If the world does take action, firms like BlackRock will win by having portrayed themselves as responsible actors whose advice and consent is needed for climate action. These companies will be able to influence which solutions governments and international organizations implement — and which will remain off the table. They’ll be able to capitalize on trillions of dollars in public investments in green industries and technologies, while governments and taxpayers shoulder much of the up-front risk.
No matter what governments do or don’t do, financial services companies will win by making bold and highly public pronouncements about their concern for the planet. These pledges will paint them as sustainable, well-intentioned problem solvers. They’ll help ensure that these companies have their views and proposed solutions given favorable consideration in climate negotiations. And they’ll distract politicians, regulators, and commentators from the companies’ unwillingness to use their enormous financial might to force genuine change.
In the short term, at least, these financial giants can’t lose. But the rest of us can. The latest report from the Intergovernmental Panel on Climate Change is brutally direct: if the global community waits any longer to take meaningful action on climate change, we “will miss a brief and rapidly closing window of opportunity to secure a livable and sustainable future for all.” Hiding these firms’ enthusiasm for fossil fuels beneath soothing promises of green investments serves only to distract from the urgency of meaningful action and thus makes an already formidable challenge even more difficult.
“We Offer Our Clients Choice on How to Invest”
Last July, representatives of the Group of Twenty (G20), a forum made up of nineteen nations and the European Union (EU), gathered in Venice for the organization’s 2021 International Conference on Climate Change. The G20 includes many of the world’s richest and most powerful countries, including the United States, China, India, and Japan. Its member countries represent more than 80 percent of global GDP and produce a similar proportion of greenhouse gas emissions.
It wasn’t surprising to find BlackRock’s Larry Fink in attendance alongside finance ministers, central bankers, and other government officials. At the time, his company was responsible for $9.5 trillion worth of investments. If its assets under management were one nation’s GDP, BlackRock would boast the third-largest economy in the world.
But it wasn’t just BlackRock’s financial clout that secured Fink’s place on stage. In recent years, the firm has successfully cultivated a different source of power: its growing reputation for leadership on social and environmental issues.
This approach was on full display in Venice, where Fink was invited to speak on a panel about “climate change and the financial system.” Among the speakers seated alongside Fink were two of Europe’s most powerful financial regulators: Christine Lagarde, the president of the European Central Bank, and Paolo Gentiloni, the European Commissioner for the economy.
Before the panelists said a word, the event had already positioned Fink as a peer of two officials who regulate his company and oversee his industry. It had given him an attentive audience of people whose decisions directly affect BlackRock’s business. It had portrayed him as an advocate for tackling climate change. And it had revealed the extent to which regulators and government officials seek BlackRock’s advice. (BlackRock did not respond to multiple emails requesting comment for this story.)
Fink spoke first. He used the opportunity to argue, as he has on numerous occasions, that the global focus on holding publicly traded companies accountable for their environmental commitments “is creating a massive incentive for public companies to divest dirty assets.”
As Yannic Rack wrote recently for Wired, in order to appear green, many utilities have “sold some of their most polluting power plants” and “big oil companies have . . . been getting rid of oil and gas fields to reach emissions targets.” There’s still a huge market for these assets because fossil fuels remain extraordinarily lucrative — and this was true even before Russia’s invasion of Ukraine helped drive oil prices to their highest levels since 2008.
But even as Fink extolled the importance of solving climate change, his company wasn’t wavering in its commitment to oil, gas, and coal. At the time, BlackRock had $259 billion invested in fossil fuels around the world. According to a recent report by more than 25 NGOs, BlackRock remains the single largest institutional investor in coal, with nearly $109 billion invested in the industry.
In January of this year, in response to efforts by Texas policymakers and industry leaders to punish companies that divest from fossil fuels, BlackRock’s head of external affairs wrote a letter emphasizing the firm’s ongoing interest in oil and gas, noting that BlackRock is “perhaps the world’s largest investor in fossil fuel companies,” and promising to “continue to invest in and support fossil fuel companies.”
“We offer our clients choice on how to invest,” the letter said. If an investor wants to put their money in the most extractive and carbon-intensive companies imaginable, BlackRock will provide it. But if an investor wants a fund that claims to be free of fossil fuels, BlackRock will happily provide that, too.
Even absent government action on climate change, demand for such “sustainable” investments is growing rapidly. As Fink noted in his 2022 CEO letter, which was published two weeks after BlackRock reiterated its determination to continue supporting the fossil fuel industry, “the tectonic shift towards sustainable investing is still accelerating.”
For BlackRock, this tectonic shift is already a cash cow. In just the first nine months of 2021, according to the company, investors poured $64 billion into the company’s “sustainable investment strategies.” Over that same nine-month period, BlackRock launched sixty “new sustainable ETFs [exchange-traded funds] and index mutual funds.” Today, according to the Financial Times, BlackRock manages nearly 60 percent of all global assets invested in ESG-themed ETFs.
As a result, BlackRock now oversees more than half a trillion dollars of investments that it markets as “sustainable.”
“Since ESG products generally carry higher fees than non-ESG products, this represents a highly profitable and fast-growing business line,” Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing, has written.
Yet despite the green branding, “I have not seen [BlackRock offer] any truly fossil [fuel]–free products or real sustainable options,” said Andrew Behar, CEO of the shareholder advocacy group As You Sow, which has spent years pushing BlackRock to make good on its climate pledges.
BlackRock is “supporting the extractive economy while talking about how they are supporting the regenerative economy,” Behar said. “These are two different paths, and by saying one thing and doing another, they damage their credibility.”
BlackRock, however, seems determined to travel down both paths as long as possible. Green investments are already profitable. If governments fail to take more meaningful action, oil, gas, and coal investments will remain profitable as well.
“We Focus on Sustainability . . . Because We Are Capitalists”
What happens if the doomsayers are wrong and governments do move forward with ambitious plans to tackle climate change? BlackRock wins then, too.
In fact, it’s this scenario in which the firm’s rhetorical investments in climate change — the speeches and panel appearances, the public letters to CEOs, the pledges of sustainability and net zero and decarbonization — would really start to pay off. As Fink’s appearance at the G20 showed, BlackRock has earned so much elite credibility from its high-profile pronouncements that, combined with its ever-growing financial and political power, the firm seems almost guaranteed to have its views and ideas given serious consideration.
At the G20, for instance, Fink urged governments to address the “demand side” of the green economy by making environmentally friendly products, services, and technologies more affordable and easier to access. To reduce the “green premium,” particularly in emerging markets, “we need to mobilize public and private capital,” Fink said.
“We need to rethink the way international financial institutions can support low-carbon investments at scale,” he added, and “mitigate the risks of investing in the emerging world” — meaning governments should assume some of the initial risks on behalf of private investors.
The institutions Fink was referring to were the World Bank and the International Monetary Fund (IMF), and what he was proposing were not small tweaks. Unlike, say, the person seated directly to his left, Christine Lagarde, who also happens to have run the IMF for nearly a decade, Fink does not hold public office. He is not elected or supervised by anyone except BlackRock’s board of directors. Yet his proposals would, as the New York Times put it, “fundamentally change the function of the World Bank and the IMF, as well as reshape the role of governments in combating climate change.”
Fink concluded his remarks on an optimistic note — or, at least, an optimistic note for investors. “By BlackRock’s own research,” he said, “the [green] transition . . . represents an investment opportunity for long-term investors of as much as $50 trillion.” That’s a pretty attractive pot of money for the world’s biggest long-term investor.
In offering these ideas — shifting scrutiny away from publicly traded companies, channeling public capital to private firms, having governments bear up-front risks — Fink might have good intentions. My conversations with people who have worked with him suggest that he genuinely cares about climate change. Whether his proposals would be good for society and the planet is a matter worthy of public discussion.
What’s undeniable, however, is that his proposals would be good for BlackRock. When executives from BlackRock — or any company — meet with government officials or engage in forums like the G20, they have “a clear goal of what [they] are trying to get out of it,” Fancy, the former BlackRock sustainable investing executive, told me. “In any conversation like that, they’re out there to push their interest. That’s what they’re optimized to do.”
Or as Fink put it in his 2022 CEO letter, “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients.”
BlackRock’s participation in climate negotiations will always come with this caveat. When the firm’s executives sit down at that metaphorical (or literal) negotiating table, they don’t do so as concerned citizens — or at least not exclusively as concerned citizens. They are representatives of BlackRock, an asset manager and a publicly traded company with legal and financial obligations to its clients and its own shareholders. When Fink flies to Venice to speak at the G20, or when he attends the UN Climate Change Conference, he can’t set aside these responsibilities.
That doesn’t mean BlackRock and its competitors should never be at the table. It’s almost impossible to imagine a realistic scenario for solving climate change that doesn’t involve good-faith engagement from private businesses and investors.
But it’s easy to imagine a scenario in which the only ideas that governments are willing to consider are the ones that companies like BlackRock advocate for and approve of. As Anand Giridharadas warns in Winners Take All: The Elite Charade of Changing the World, “When elites assume leadership of social change, they are able to reshape what social change is — above all, to present it as something that should never threaten winners.”
While BlackRock might support policies that benefit the company and benefit society, it will not support policies that are good for society but bad for BlackRock. “They’re only ever going to advocate for stuff that’s good for them,” Fancy told me. “And if it happens to overlap with stuff [that’s] good for the world, then they’ll talk about that twice as much.”
Sustainable Window Dressing
Recall that at the G20, Fink pushed for regulatory scrutiny to concentrate on privately held and state-run companies to which public firms are increasingly offloading dirty assets. “As private and state-owned companies produce a greater and greater share of oil and gas, there will be less scrutiny [and] less disclosure around global emissions,” he said.
This assessment, while accurate, requires some context. More scrutiny of private firms might also mean less scrutiny — and less regulation — of publicly traded ones like BlackRock. In an example of saying the quiet part out loud, Fink predicted last February that because market forces are already driving public companies to disclose and reduce their carbon emissions, “we are not going to need . . . governmental change or regulatory change.”
Shifting the focus to private and state-run companies provides another benefit: It helps avoid uncomfortable questions about why fossil fuels remain such good investments. For instance, BlackRock remains a dues-paying member of organizations like the Business Roundtable and the US Chamber of Commerce, which have lobbied aggressively to defeat the very sort of climate legislation that might drive up the costs of carbon emissions and make those dirty assets more costly and, in turn, less profitable.
Moreover, BlackRock continues to move its own money into private and state-owned energy companies like Centric Infrastructure Group, a natural gas and internet provider in Texas that received a $280 million investment from the firm in 2021, and the WhiteWater Whistler pipeline, a Texas pipeline project that benefited from a $42 million loan from BlackRock the year before.
Last December, BlackRock led a coalition of investors that reached a deal with Saudi Aramco, Saudi Arabia’s state-owned oil and gas behemoth, to invest more than $15 billion in new natural gas infrastructure. BlackRock has invested more than $34 billion “in companies that are still developing new coal assets,” according to a recent report.
Investing in privately held oil, gas, and coal assets is not the same thing as offloading them, but as Fink has said many times, no matter how fossil fuel extraction is funded, the impact on the planet is the same. To use Fink’s own words, “That does not change the net-zero world. That’s window dressing, that’s greenwashing.”
In fact, behind closed doors, BlackRock has assured some fossil fuel interests that window dressing is all it is. As Josephine Moulds reported recently in The Bureau of Investigative Journalism, following BlackRock’s outreach to Texas oil and gas leaders in January, the state’s top oil and gas regulator sent the firm an email. “It was nice to hear that BlackRock didn’t mean — or no longer believes — many of the disagreeable things the company and its CEO Mr. Fink have said about the oil and gas industry,” he wrote.
Yet among other elite audiences that BlackRock courts — such as green-minded investors, regulators, and the business media — sustainable window dressing is proving just as valuable as sustainable action.
Since January 2018, when Fink’s annual CEO letter took the business media by storm by proclaiming that companies need to serve all of their stakeholders, not just shareholders, BlackRock’s assets under management have grown from $6 trillion to more than $10 trillion. According to the firm’s own promotional materials, BlackRock has been included in the Dow Jones index of the “most sustainable companies in North America”; graded one of America’s “100 Most Sustainable Companies” by Barron’s; and awarded the number-five slot on Fortune magazine’s 2020 “Change the World” list, which features companies that “tackle society’s unmet needs.”
These recognitions reflect the third plank of the “win-win-win”: Simply talking about climate change, whether in a public letter or on a panel or as part of a published report, generates plaudits and positive media coverage. In turn, plaudits and positive coverage distract regulators and reporters from the company’s continued monetization of fossil fuels, drive more “sustainable” business to BlackRock, and help the firm secure access to the high-level policymakers shaping the world’s response to climate change. Public celebration of the firm’s sustainable promises and investment products then earns the firm more plaudits, more positive media coverage, and more access to politicians and officials.
This cycle of climate-driven profitability is all the more tragic because BlackRock, by virtue of the size of its portfolio and the scope of its political influence, has a rare and remarkable opportunity to drive real action on climate change.
Larry Fink “has the power to actually shift the world in a significant way,” As You Sow’s Behar told me, “and chooses not to.”
A Question of Power
Before introducing Fink and his fellow panelists at the G20, Ignazio Visco, the head of the Bank of Italy, made a profound comment, though he did so almost in passing. “Clearly,” Visco observed, “it is national governments that have the required democratic legitimacy to apply the most suitable tools” to the climate crisis.
Corporations have no such democratic mandate, but they have another powerful tool to shape the world’s response to the crisis: profit motive. “I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime,” Fink wrote in his 2022 CEO letter. “Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?”
BlackRock intends to lead, of course, because leading is where the power is. And the question of climate change, as Kate Aronoff shows in Overheated: How Capitalism Broke the Planet — and How We Fight Back, is fundamentally a question of power.
“The main barrier to climate action isn’t a technological one: The core tools needed to deal with this problem already exist,” Aronoff writes. “The problem has been power, and that the people proposing the most workable, reasonable solutions don’t have enough of it.”