BlackRock Promised to Be Climate-Conscious. The Joke’s on Us.
Four years ago, BlackRock promised to steer away from environmentally destructive investments. Since then, it has faced predictable backlash, gotten cold feet, and dropped the act. Let that be a lesson about pinning our climate hopes on capital.
Larry Fink, chairman and CEO of BlackRock, at the Fox Business Network studios on March 27, 2024, in New York City. (John Lamparski / Getty Images)
Financial institutions like to pay lip service to the climate catastrophe to burnish their public image. Doubtless, that’s what BlackRock chair Larry Fink, who oversees more money than the combined GDPs of Japan and Germany, had in mind when he declared four years ago that “climate risk is investment risk.”
At the time, the announcement shocked financial observers, who tend to wait for Fink’s annual letter to CEOs as if it’s a new set of commandments. They speculated that Fink’s new environmental focus could rewrite the rules of global finance, putting BlackRock’s more than $10 trillion in assets under management behind “greener” finance.
The ensuing years saw a concentrated pushback from investors, lawmakers, and businesses as firms with less-than-green credentials went into panic mode. Republican state lawmakers wrote letters, state governments began blacklisting BlackRock from public funds, and House leaders filed subpoenas, putting the asset manager on the back foot.
In the wake of the backlash, BlackRock is voting for the fewest number of environmental, social, and governance–related (ESG) proposals in years. It has even begun actively playing up its fossil fuel investments.
Four years on from Fink’s forthright statement, the world is getting a sobering reminder that as far as the investors at the heart of the global financial system are concerned, saving the world isn’t really the point. As for Larry Fink, he’s stopped even pretending to care.
Shock to the System
For true believers in green finance, Fink’s open letter in 2020 seemed like a victory in a decades-long uphill battle. Like competitors Vanguard and State Street, BlackRock is what’s known as a passive manager, investing enormous sums for huge numbers of people (more than thirty-five million Americans have money in BlackRock funds) across a vast array of companies. Whereas some money managers carefully pick and choose investments, passive investors wager that investments go up in value most of the time. If you buy everything, eventually you’ll make money.
That game plan worked for BlackRock, turning Fink into a billionaire and his company into the largest asset manager in history. Along the way, both Fink and his company garnered reputations for being studiously, even aggravatingly neutral, avoiding taking strong stances on contentious issues or favoring particular companies or strategies.
BlackRock’s default mode is to buy and hold. As a result, passive managers have amassed substantial stakes in a wide range of companies. The sheer scale of its operation means that BlackRock’s investments matter a great deal.
Theoretically, then, if BlackRock had been willing to follow words with action and begin voting for green shareholder proposals, it could have reshaped the bedrock of the financial system — hence the flurry of celebrations and denunciations. As a Quartz headline put it, capturing the gravity of the reaction, “BlackRock is forcing finance to take climate risk seriously.”
In Name Only
Astoundingly, BlackRock did not force finance to take climate risk seriously. A company report late last month revealed that BlackRock has backed just 4 percent of ESG proposals in the year up to June 2024, down from 7 percent the year prior. The year before that, the rate was over 20 percent.
By all counts, BlackRock remained firmly on the fence. While the overall proposals supported were down, the company also voted against eighty-eight proposals that would have had company mangement rolling back sustainability efforts. Morningstar, a financial research company, found a major uptick in anti-ESG resolutions in this year’s proxy voting season.
Meanwhile, BlackRock set up a web page “setting the record straight” on its energy investment policies. On the site, the company trumpets the $225 billion it has invested in American energy companies.
“BlackRock has been accused of ‘boycotting’ energy companies,” the website says. “Quite the opposite: BlackRock’s clients are some of the largest investors in the energy industry.”
A subtitle on the page puts it more bluntly: “We DO NOT boycott the energy industry.”
“Since our founding, our growth reflects the choices our clients make and their trust in us as a fiduciary,” a BlackRock spokesperson said in response to Jacobin’s request for comment, adding that client assets in strategies designated as “sustainable” have grown more than 760 percent over the last five years.
BlackLash
Some of the louder protests against BlackRock’s green investing announcement are likely connected to a concerted effort by right-wing groups to brand the company as “woke” capital. Tucker Carlson, for example, hosted a guest who blamed socially conscious investing for inflation. The guest had just been briefed by Strive, an anti-ESG asset management firm backed by Peter Thiel.
Opposition to BlackRock’s ESG push became a cause célèbre. Fink’s statement triggered several states, including Texas and Florida, to blacklist the company from state investment. The secretaries of state of Mississippi and Indiana both sent cease-and-desist letters to the company, accusing BlackRock of misleading investors. The company “allegedly informed clients they would see better long-term financial prospects and financial outcomes through ESG-backed funds,” the Indiana complaint stated. BlackRock has called the letter a politically motivated attack.
In March of last year, twenty-one attorneys general wrote to asset managers to warn against the increasing focus on ESG. In the letter, BlackRock was singled out for taking voting action against fifty-three companies that had made “insufficient progress on climate risk management,” as revealed in the company’s 2020 stewardship report.
In the company’s 2024 voting report, by contrast, the BlackRock line was resolutely neutral, stating, “Companies determine the best approach for addressing material climate-related risks and opportunities, if any, given their business models, sectors, and areas of operations.”
Then, late last year, the House Judiciary Committee subpoenaed both BlackRock and State Street for “documents and communications related to the Committee’s investigation into the sufficiency of current antitrust laws to address collusive agreements to promote and adopt left-wing environmental, social, and governance (ESG) goals.”
Under pressure, BlackRock had to take inventory and ask itself what it really cared about. The answer was easy — and it wasn’t the environment.
Low Expectations
None of this should surprise anyone. BlackRock’s skittishness and empty words are part of the product. BlackRock doesn’t exist to ease the worst effects of climate change, nor is it here to push companies in a more responsible direction. BlackRock, like every other financial firm that’s ever existed, has a single goal: to make money.
The company itself isn’t shy about making this point. In communications to the press, the company repeatedly emphasized its fiduciary duty (a legal obligation to act in the best interests of clients) above all else. Ultimately, the joke was on hopeful observers for expecting something different.
The brief period in which it looked like BlackRock was reckoning with its status as the world’s largest investor and coming to terms with its duty to the planet is over. Let it be a reminder to those who thought the financial system capable of change: green finance is a contradiction in terms.
The financial world may recognize that climate risk is investment risk. But it is fundamentally incapable of doing anything about it beyond empty press releases and worthless letters from an investor who couldn’t care less.