BlackRock's Larry Fink is playing semantics with ESG
Over the past few years, BlackRock CEO and chairman Larry Fink has been an unapologetic champion of environmental, social, and governance (ESG) investing, also known as "stakeholder capitalism."
BlackRock states that it incorporates "financially material environmental, social, and/or governance information into investment research and decision-making, based on the conviction that sustainability-integrated portfolios can provide better risk-adjusted returns to investors."
Fink has also mentioned that ESG/stakeholder capitalism is a primary element of BlackRock's long-term investment strategy in every single one of his annual letters to CEOs since 2018.
Yet, in recent days, Fink has changed his tune when it comes to ESG, saying, "I'm not going to use the word ESG because it's been misused by the far left and the far right." He added that ESG has been "weaponized" and that he is "ashamed" to be part of the ESG debate.
However, he quickly backtracked, claiming, "I never said I was ashamed. I'm not ashamed. I do believe in conscientious capitalism."
In effect, Fink is trying to blur the lines by playing semantic word games.
For all intents and purposes, ESG, stakeholder capitalism, and conscientious capitalism are synonyms for what Fink describes as the "power to shape society and act as a powerful catalyst for change."
Make no mistake: with more than $9 trillion in assets under management, including more than a 7-percent share in 95 percent of S&P 500 companies, BlackRock certainly has the wherewithal to "shape society" and enact "change."
In fact, under the guise of ESG/stakeholder capitalism, BlackRock (along with State Street and Vanguard) has already "shaped society" and produced wide-ranging "change" throughout the U.S. economy.
For example, BlackRock has flexed its muscle by forcing oil and gas companies to reduce fossil fuel production.
According to its website, "BlackRock believes that collaboration between investors, companies, regulators, and others is essential to improving the management of sustainability questions. We are a founding member of the Task Force on Climate-related Financial Disclosures (TCFD), and a signatory to the UN's Principles for Responsible Investment. BlackRock recently joined Climate Action 100+, and prior to joining, BlackRock was a member of the group's five sponsoring organizations. Climate Action 100+ is a group of investors that engages with companies to improve climate disclosure and align business strategy with the goals of the Paris Agreement."
BlackRock also uses its outsized financial clout, in collusion with Vanguard and State Street, to force major corporations to pursue "diversity audits" among many other types of non-pecuniary interests, under the banner of ESG/stakeholder capitalism.
The good news is that it seems as if BlackRock's ESG/stakeholder capitalism/conscientious capitalism jig is up. Over the past few years, several states have made it crystal-clear that they want nothing to do with ESG, or whatever else BlackRock may call it.
To date, states like Florida, Texas, and many more have pulled tens of billions of dollars from BlackRock due to its misguided ESG investment strategy.
As Gov. Ron DeSantis put it, "Florida will continue to lead the nation against big banks and corporate activists who've colluded to inject woke ideology into the global marketplace, regardless of the financial interests of beneficiaries."
It also should be noted that most Americans who are aware of ESG investing do not support it as a factor in investment decisions. Unsurprisingly, the vast majority of Americans, especially those who own stocks, want "only financial factors" to be considered when investment decisions are made.
Perhaps the concerted backlash against ESG is driving Fink to run away from the term. Nevertheless, whether he calls it "conscientious capitalism," "stakeholder capitalism," "sustainable investing," or anything else, it all is one and the same.
In my opinion, the most accurate term to describe all this nonsense is simple: "crony capitalism."
Chris Talgo (email@example.com) is editorial director at The Heartland Institute.
Image: Christopher Michel.