The power of making a fuss
As head of BlackRock, the largest asset manager, Larry Fink’s pivot to responsible investing in recent years has been influential.
Fink’s annual letter to chief executives this year is all about climate change, which he calls “a defining factor in companies’ long term prospects”, forecasting a “significant reallocation of capital” in the “near future”.
He does not seem in much hurry. BlackRock is only this year divesting from companies that make more than 25% of revenue from thermal coal. In its active portfolios only. Never mind that oil companies it owns are busy making climate change worse.
In last year’s letter, Fink did not mention the climate. What has made the difference?
BlackRock has been criticised for its lukewarm record on the environment. In January 2019, 12 investors and NGOs criticised it for consistently voting against shareholder climate proposals.
Fink acknowledges that young people have been “calling on institutions — including BlackRock” to do more.
The power of protest appears to have worked. At least, it recognises that society at large is objecting to the economy sleepwalking to a climate disaster.
But the firm still seems allergic to raising its own voice. Though it engages with companies on environmental issues, it does this in private, rarely backing shareholder motions and often voting against them.
The Securities and Exchange Commission is now trying to constrict shareholders’ rights to propose motions. The defence is being led by tiny ESG fund managers.
Why can’t BlackRock see — and admit — that loud protest makes a difference? This is not a polite tea party. It must turn up the volume — and should start by condemning the SEC’s attacks on corporate governance as rudely as possible.