BlackRock’s Larry Fink omits ‘ESG’ from annual letter after recent GOP blowback

BlackRock CEO Larry Fink’s eagerly awaited annual letter deemphasized the importance of climate talk and stated that companies aren’t. “the environmental police,” A notable shift in tone has occurred in recent years, making him a popular target of conservatives.

Fink began writing an annual open investment letter that executives and business leaders must read each year. Fink used his 2020 letter to highlight climate change. “defining factor” BlackRock’s assessment for companies.

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Fink decided to not lead the discussion on climate change or ESG this year and instead emphasized choice.

“Clients have always been central to all we do. Today we serve clients who have a wide range of investment objectives, preferences, time horizons, and risk tolerances,” Fink wrote. “We offer them choices to help them reach their investment goals. And we manage their assets consistent with their objectives and guidelines.”

Fink also spoke out about BlackRock. “Voting Choice” initiative that allows all U.S. government and private pension plans, as well as endowments and insurance companies, to take part in the proxy vote process.

“There are many people with opinions about how we should manage our clients’ money. But the money doesn’t belong to these people. It’s not ours either. It belongs to our clients, and our responsibility and our duty is to them,” Fink was added. “Choice has never been more important to BlackRock than it is today because we have never served a broader and more diverse set of clients.

Fink pointed out that more than half of the companies in the S&P 500 are now voluntarily reporting disclosures about climate emissions — the federal government is working toward mandating doing so — although he emphasized the separation between the corporate world and government policy.

“This number is likely to increase. As I have repeatedly stated over many years, it is up to governments to make policy, enact legislation and not companies, asset managers or individuals to be the environmental police.” Fink said.

Notably, the phrase “Governance, governance and environmental.” or its more commonly used acronym “ESG,” is not explicitly mentioned once in the entire 9,000-word letter. Meanwhile, “Choice” is mentioned more than two dozen times, and “Clients” over 100 times.

Later in the letter, more than halfway through, Fink mentions “Climate” for the first time. He discusses how BlackRock monitors climate risk and says that the transition away from fossil fuels is still part of long-term investment strategies.

“To invest for the long-term, you must take a long-term perspective of the factors that will affect returns. This includes demographics, government policies, technological advances, and transitioning to a low carbon economy.” Fink said.

Last year, in his much shorter 3,300-word letter, he defended against Republican accusations that the massive firm had gone “woke.” Fink defended “Stakeholder capitalism” from the idea that it is a political movement and urged companies to embrace its tenets.

The shift comes amid a broad push by Republicans to rebut ESG investing and specifically push back against BlackRock, which has, in some respects, become the GOP punching bag for the ESG movement.

Late last year, Florida’s chief financial officer said the state would divest some $2 billion from the money manager, the largest such state divestment from BlackRock yet over its stance on environmental and social goals.

States such as South Carolina, Utah, Arkansas, Missouri, Louisiana, and others have also divested or announced planned divestments of hundreds of millions of dollars from BlackRock and Fink.

“As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are — and I don’t trust BlackRock’s ability to deliver,” said Florida CFO Jimmy Patronis.

During an interview with Bloomberg during the World Economic Forum in Switzerland, Fink addressed the GOP attacks.

“This is something I take very seriously.” Fink said. “We are working to correct the myths. It’s difficult because it’s no longer business. They do it personally. For the first time in my professional life, the attacks have become personal. They want to make the problems seem vile.”

Republican states, many with robust energy industries that contribute to employment, fear that the corporate world is trying to “Bossa Nova” fossil fuels and see ESG as a direct threat to their state’s economy.

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There have also been accusations that by prioritizing ESG, major firms like BlackRock are cutting against their main commitment, which is to return value to shareholders. Fink closed out his 2023 letter by emphasizing the delivery of returns.

“BlackRock clients are my advocate. I speak up to promote long-term investing and warn investors about potential risks.” he wrote. “BlackRock was founded in 2005. We have been unwaveringly committed to our clients’ needs and have provided outstanding returns for our shareholders.”