Larry Fink’s letter to CEOs states that stakeholder capitalism is not “awakened”

Laurence D. Fink, founder and CEO of investment giant BlackRock, has become one of the most influential voices in business over the past decade in pushing business leaders to think beyond profit, for their social purposes.

Mr. Fink has delivered his words in annual letters that have attracted remarkable attention, but also criticism from all sides: that he stands in gratitude to politically correct antibusiness activists, or that he collaborates on these issues for marketing purposes.

On Monday night, he used his latest letter to Corporate America to clarify – and defend ̵[ads1]1; his approach.

“Stakeholder capitalism is not about politics,” Fink wrote to CEOs of companies in which BlackRock has invested. “It has not ‘awakened.’ It’s capitalism. “

Mr. Fink’s annual letter is widely followed, and this year’s 3300-word edition is guaranteed to be read in boardrooms and beyond.

On Friday, BlackRock said it managed more than $ 10 trillion in assets across a range of index funds, pension plans and other investment products, consolidating the company’s position as the world’s largest asset manager. It gives Mr. Fink a huge impact: If a public company that BlackRock has invested in ignores his calls, his firm can try to remove the directors or, among the actively managed funds, sell its shares.

So when Mr. Fink began urging CEOs four years ago to consider how they contributed to society, his words weighed heavily. Within weeks of telling leaders in 2020 that climate change would be a “decisive factor” in how BlackRock rated their companies, many blue-chip companies announced plans to become carbon-neutral or carbon-negative.

In this year’s letter, Fink urged CEOs to continue to embrace their moral responsibility as the pandemic transforms society and business, and as consumers and workers demand more from businesses.

But in perhaps the most eloquent sentence, he said that what drove his push for companies to have a purpose was to make a profit. Make no mistake, the just pursuit of profit is still what animates markets; and long-term profitability is the goal that the markets will ultimately determine the company’s success, “he wrote.

Much of this year’s letter was devoted to Mr. Fink’s belief that focusing on environmental, social and corporate governance issues – ESG, for short – is not in conflict with making money. Reducing a company’s carbon footprint, for example, makes the business more robust in the long run, which is in investors’ interest.

“We focus on sustainability, not because we are environmentalists, but because we are capitalists and trustees of our customers,” Fink wrote.

He suggested that ESG was not a fad, but a permanent feature of the corporate world. Business leaders who do not adapt to the new reality, he suggested, risk being overtaken by younger and more innovative rivals over time.

¬ęThe capital markets have allowed companies and countries to flourish. But access to capital is not a right “, he wrote. “It’s a privilege. And the duty to attract that capital in a responsible and sustainable way lies with you. “

But some critics say Mr. Fink and BlackRock are not pushing companies hard enough to go green. Environmental groups have pointed to what they see as missing in Mr. Fink’s approach: BlackRock’s Big Problem, a collection of nonprofits and other advocates, accuses the firm of failing to exclude major polluters from its investment funds, even in ESG – focused products.

In his latest letter, Fink defended his more gradual approach, including a rejection of forcing BlackRock to sell stakes in fossil fuel companies. (He has previously said that the company can not get rid of many of its ordinary funds from holdings in companies that are part of large stock indices.)

“Selling from entire sectors – or simply transferring carbon-intensive assets from public markets to private markets – will not bring the world to zero,” he wrote. Focusing solely on cutting supply of oil and gas, and not reducing demand for fossil fuels, would simply drive up energy prices and encourage more setbacks to green energy efforts, he argued.

BlackRock has also faced pressure from the opposite end of the climate spectrum. Last year, Texas lawmakers passed a bill that would, on paper, block government agencies from investing public money with financial companies, such as BlackRock, if they were to “boycott energy companies.”

“If Wall Street turns its back on Texas and our booming oil and gas industry, then Texas will not do business with Wall Street,” Lt. Gov. Dan Patrick, a supporter of the bill. posted on Twitter last year.

Mr. Fink’s letter did not address the Texas bill, and to date, the state has not cut off BlackRock. He also said that the company would offer individual investors more opportunities to vote on their shares, something BlackRock has been under pressure to do, especially by Republican lawmakers who have complained that the company has too much influence. BlackRock makes it easier for institutions to vote for themselves as well.

“We are pursuing an initiative to use technology to give more of our customers the opportunity to have an opinion on how proxy votes are cast in companies in which their money is invested,” Fink wrote. “We now offer this option to certain institutional clients, including pension funds that support 60 million people.”

Along with the pressure for companies to focus more on climate, he reiterated his call on governments and multinational organizations such as the World Bank to be more supportive of green energy investments.

“Businesses can not do this alone,” Fink wrote, “and they can not be the climate police.”

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