On March 15th, BlackRock CEO Larry Fink released his annual letter, in which he held firm that climate risk is investment risk. In light of political efforts to crack down on climate action this was a reassuring signal. However, Fink failed to assert the leadership necessary for the world’s largest asset manager to properly meet and manage those investment risks.
In 2020, Fink made waves with his landmark announcement that BlackRock would place sustainability at the center of its investment approach. Three years on BlackRock has yet to close the gap between its commitment and its actual business practices. While the 2020 letter represented an important first step, a number of global financial players — among them HSBC, OFI, Chubb, and Allianz — have gone further than BlackRock in implementing fossil fuel exclusion policies and emissions reduction targets.
Fink concentrated heavily on retirement in his letter — pointing out that over half of the money BlackRock manages is connected to retirement. Fink writes about hope for the future and retiring with dignity. That clearly requires stronger engagement on climate risk. Without safeguarding retirement funds from the long-term risks of the climate crisis — without preserving the planet to support a livable future to retire into! — it is impossible for BlackRock to properly execute its duty to retirees. Until BlackRock implements concrete next steps on its climate commitments, the firm cannot do justice to its clients. Moreover, fiduciary responsibility requires that asset managers safeguard clients’ investments and retirements from long-term risks such as the climate crisis.
Fink ducked the critical role financial institutions like BlackRock must play in the energy transition by pointing to government action and regulation. He’s right, government regulation is necessary. That doesn’t mean BlackRock can sit on its hands. Not to mention, the hypocrisy! BlackRock has called for weaker SEC climate rules and not supported scope 3 disclosure. BlackRock cannot on the one hand call for regulators to step up and on the other lobby against that stronger regulation.
The client choice Fink touts cannot be a bulwark for BlackRock to abdicate its responsibility to actively and proactively manage the financial risk of the climate crisis. Fink also claimed it’s not in BlackRock’s purview to engineer real-world outcomes while failing to acknowledge that continuing to funnel funds into fossil fuels is doing just that. Maintaining the status quo is creating a very real outcome.
Disappointingly, Fink again touted BlackRock’s gas pipeline deal and clearly believes we can continue fossil fuel expansion by relying on unproven technologies and crossing his fingers. As the latest International Panel on Climate Change’s report makes clear, this stance is incompatible with 1.5°C.
Larry’s letter was released amidst a newly charged environment. Fringe climate deniers funded by dark money groups have launched a political campaign against ESG investing, an obscure, niche framework unheard of by most. Punishing investors for taking risk into account is as far as they can go to prevent progress on climate and workers’ rights without having to admit that that is what they are doing. Sadly, these political actors don’t have a viable alternative to protecting constituents, investors, pensioners, and workers from the detrimental impacts the climate crisis is already exacting on communities. Preventing financial institutions from responding to evident risk is extremely bad business.
As we’ve been reminded with last month’s banking collapse, volatile markets mean people suffer while billionaires get bailouts. Without long-term risk integration to even short-term goals, we will see this same result over and over again. Huge financial institutions like BlackRock must assume the mantle of leadership and do their part to manage for and mitigate the future financial shocks the climate crisis will provoke. Fiduciary duty demands nothing less.
