Laurence D. Fink, founder and CEO of investment giant BlackRock, has become one of the most influential voices in business over the past decade, pushing business leaders to think beyond profit, for their social purposes.
Mr. Fink has delivered his words in annual letters that have attracted remarkable attention, but also criticism from all corners: that he is addicted to politically correct anti-business activists, or that he addresses these issues for marketing purposes.
On Monday night, he used his latest letter to corporate America to clarify - and defend - his approach.
"Stakeholder capitalism is not about politics," wrote Mr. Fink to the top executives of companies that BlackRock has invested in. "It's not 'awakened'. It's capitalism."
Mr. Fink's annual letter is widely followed, and this year's 3,300-word edition will surely be read in boardrooms and beyond.
On Friday, BlackRock said it managed more than $ 10 trillion in assets across a range of index funds, pension plans and other investment products, cementing the company's position as the world's largest asset manager. It gives Mr. Fink a huge influence: If a public company in which BlackRock has invested ignores his calls, his firm can seek to fire its directors or, among its actively managed funds, sell its shares.
So when Mr. Fink began urging top executives four years ago to consider how they contributed to society, his words weighed heavily. Within weeks of telling leaders in 2020 that climate change would become a "defining factor" in how BlackRock rated their companies, many blue-chip companies announced plans to become CO2-neutral or CO2-negative.
In this year's letter, Mr. Fink top executives to continue to embrace their moral responsibilities as the pandemic transforms society and business, as consumers and workers demand more from businesses.
But in perhaps the most telling sentence, he said that what drove his push for companies to have a purpose was to create profits. "Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the goal by which markets ultimately determine the success of your business," he wrote.
Much of this year's letter was devoted to Mr. Fink's belief that focusing on environmental, social and corporate governance issues - ESG, for short - is not in conflict with making money. For example, reducing a company's CO2 footprint makes the company more robust in the long run, which is in the interest of investors.
"We focus on sustainability, not because we are environmentalists, but because we are capitalists and loyal to our customers," he wrote. Fink.
He suggested that ESG was not a fashion phenomenon but a permanent feature of business. Business leaders who do not adapt to the new reality, he suggested, risk being overtaken by younger and more innovative rivals over time.
'Capital markets have given companies and countries the opportunity to flourish. But access to capital is not a right, ”he wrote. "It is a privilege. And the duty to attract that capital in a responsible and sustainable way lies with you."
But some critics say that Mr. Fink and BlackRock are not pushing companies hard enough to go green. Environmental groups have highlighted what they see as missing in Mr. Fink's approach: BlackRock's Big Problem, a collection of nonprofits and other advocates, accuses the firm of failing to exclude major polluters from its investment funds, even in ESG-focused products.
In his latest letter, Mr. Fink's more gradual approach, including a refusal to force BlackRock to divest ownership of fossil fuels. (He has previously said that the company cannot exempt many of its ordinary funds from holdings in companies that are part of large stock indices.)
"Divesting entire sectors - or simply transferring CO2-intensive assets from public markets to private markets - will not bring the world to zero," he wrote. Focusing solely on cutting supply of oil and gas and not reducing the demand for fossil fuels would simply drive up energy prices and encourage more backlash against green energy efforts, he argued.
BlackRock has also been exposed to pressure from the opposite end of the climate spectrum. Last year, Texas lawmakers passed a bill that, on paper, would block government agencies from investing public money with financial companies like BlackRock if they were to "boycott energy companies."
"If Wall Street turns its back on Texas and our booming oil and gas industry, then Texas will not do business with Wall Street," said Lieutenant Dan Patrick, a supporter of the bill. posted on Twitter last year.
Mr. Fink's letter did not address the Texas bill, and to date, the state has not cut off BlackRock. He also said the firm would offer individual investors more opportunity to vote for its shares, something BlackRock has been under pressure to do, especially by Republican lawmakers who have complained the firm has too much influence. BlackRock also makes it easier for institutions to vote for themselves.
"We are pursuing an initiative to use technology to enable more of our customers to have an influence on how proxy votes are cast on companies in which their money is invested," wrote Mr. Fink. "We now offer this opportunity to certain institutional clients, including pension funds that support 60 million people."
Along with his push for companies to focus more on climate, he reiterated a call for governments and multinational organizations such as the World Bank to support investment in green energy more.
"Businesses can not do this alone," wrote Mr. Fink, "and they can not be the climate police."