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BlackRock CEO Larry Fink says stakeholder capitalism is not “awake”

Larry Fink, CEO of BlackRock Inc., in Zurich, Switzerland, on Thursday, March 7, 2019.

Stefan Wermuth | Bloomberg via Getty Images

The CEO of BlackRock has tried to defend a shareholder movement that focuses on putting the interests of the wider society before profit, saying that so-called "stakeholder capitalism" is neither political nor "vigilant".

In his much-anticipated annual letter to business leaders, entitled "The Power of Capitalism," BlackRock CEO Larry Fink on Monday pushed back against accusations that the asset manager was using his weight and influence to support a politically correct or progressive agenda.

"Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not 'awakened,'" Fink said.

"It's capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers and communities that your business depends on to thrive. This is the power of capitalism."

Fink's annual announcement to CEOs outlines the priorities he sees as crucial to helping BlackRock's customers achieve "sustainable" long-term returns and achieve their goals. In recent years, the letter has focused on a number of issues, ranging from the diversity of boardrooms to the climate crisis.

His public support for investment in accordance with environmental, social and administrative standards has aroused criticism from all sides. To some conservative groups and U.S. lawmakers, BlackRock, which last week exceeded $ 10 trillion in assets under management for the first time, has been accused of "waking up" to hide cash flows to Chinese companies through their investment funds.

BlackRock became the first foreign-owned company to run a wholly owned company in China's mutual fund industry last year.

The asset manager has previously acknowledged the "complex" economic conditions of the United States and China. It has also said it believes that globally integrated financial markets can "give people, businesses and governments in all countries better and more efficient access to capital that supports economic growth around the world."

Individually, environmental activists have attacked the company for not completely divesting from fossil fuel companies and many other major contributors to the climate crisis.

Fink's letter reaffirmed the asset manager's policy of engaging with companies seeking to participate in the so-called "energy transition" instead of divesting them altogether. He added that companies could not be the "climate police" alone, and instead they would have to work with governments.

"Selling off entire sectors - or simply transferring carbon-intensive assets from public markets to private markets - will not bring the world to zero. And BlackRock does not pursue divestments from oil and gas companies as a policy," Fink said.

BlackRock's CEO said the asset manager is also working to expand an investor initiative to use technology to cast proxy votes.

"We are committed to a future where any investor - even individual investors - can have the opportunity to participate in the proxy voting process if they so choose," Fink said.

"We know there are significant regulatory and logistical obstacles to achieving this today, but we believe this can bring more democracy and more voices to capitalism. Every investor deserves the right to be heard. We will continue to pursue innovation and working with other market participants and regulators to help advance this vision towards reality. "

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