The climate change-focused investment strategy known as ESG suffered another blow Tuesday at the hands of someone who was once its biggest steward on Wall Street: Larry Fink.
The BlackRock CEO called for “energy pragmatism” in his annual letter to investors. He said that consists of using clean energy to reduce global warming emissions while relying on fossil fuels for energy security.
The rhetoric from the chief executive of the world’s largest asset manager marked a significant departure from his years of staunch advocacy for ESG, or environmental, social and corporate governance investing that prioritizes climate change and social justice politics.
“Now, the demand for clean energy is being amplified by something else: a focus on energy security,” Mr. Fink wrote. “I’m hearing more leaders talk about decarbonization and energy security together under the joint banner of what you might call ‘energy pragmatism.’”
The messaging shift on a contentious issue that conservatives assail as “woke capitalism” comes after years of blowback from Republican officials against BlackRock and some of the globe’s other largest financial institutions, including State Street, Wells Fargo, JPMorgan, Bank of America and Vanguard.
Amid heightened political tensions, Mr. Fink said last year he was ditching the ESG term — but not its strategy — because it’s “been misused by the far left and the far right.”
In his 2023 letter to investors, he walked a fine line on the hot-button issue by saying it was not the role of private companies “to be the environmental police” but that BlackRock still considered “climate risk as an investment risk.”
Mr. Fink’s message to investors on Tuesday made clear that BlackRock has no intention of divesting from fossil fuels anytime soon and emphasized that oil and natural gas will be crucial for the Western world to maintain energy security in the face of foreign adversaries like Russia.
“I spent a lot of time talking to the people who are responsible for powering homes and businesses, everybody from prime ministers to energy grid operators,” he said, recounting recent meetings with world leaders in Europe. “The message I heard was completely opposite to what you often hear from activists on the far left and right, who say that countries have to choose between renewables and oil and gas. These leaders believe that the world still needs both. They were far more pragmatic about energy than dogmatic.”
BlackRock currently holds more than $300 billion in fossil fuel companies on behalf of clients, $170 billion of which are U.S. energy firms, according to Mr. Fink.
To climate activists, BlackRock is fueling climate change. To conservatives, it’s destroying the oil and natural gas industries.
Mr. Fink said their position is ultimately only about money.
“We invest in these energy companies for one simple reason: It’s our clients’ money,” he said. “That’s part of being an asset manager. We follow our clients’ mandates.”
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