Larry Fink, founder and CEO of BlackRock, disavowed the term “ESG” while speaking at the Aspen Ideas Festival earlier this week.
Fink said he no longer uses the abbreviation, which stands for “environment, social, and governance,” claiming his use of it in the past was misunderstood and it has become politically “weaponized,” as reported by Axios.
Fink’s regrets did not end there, as he went on to say, “I’m ashamed of being part of this conversation.”
“When I write these [investment] letters, it was never meant to be a political statement. … They were written to identify longterm issues to our longterm investors,” he explained.
In past letters to investors, Fink had emphasized that concern about the climate is a crucial factor in how BlackRock invests the funds it manages.
A 2020 investment letter saw Fink use the abbreviation “ESG” more than 25 times. The letter had a subheadline that read, “Putting ESG Analysis at the Heart of Aladdin,” referring to BlackRock’s vaunted investment platform.
Laying out BlackRock’s activist investor stance in black and white, the letter stated, “We have engaged with companies on sustainability-related questions for several years,” noting that the firm has requested companies publish disclosures that satisfy the Sustainability Accounting Standards Board and Task Force on Climate-related Financial Disclosures.
“[T]his should include the company’s plan for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized,” it specifies, before concluding, “we will be increasingly disposed to vote against management when companies have not made sufficient progress [on sustainability questions].”
Fink’s recent public regret stands in contrast to his track record of proudly proclaiming his company’s ESG stance.
In 2017, Fink told an audience at a New York Times DealBook conference, “You have to force behaviors. If you don’t force behaviors, whether it’s gender or race, or just any way you want to say the composition of your team, you’re going to be impacted,” reported Fox Business.
BlackRock is the world’s largest investment firm, with over $9 trillion under its management.
However, Fink admitted that Florida’s decision to take away $2 billion of the state’s assets that were under BlackRock management hurt the company, reported Axios.
Florida pulled the investment in December 2022 because of BlackRock’s ESG policies in its investment strategy.
Yet under further questioning about the shame he felt about being part of the ESG debate, Fink appeared to contradict his earlier statement.
“I never said I was ashamed,” Fink said, per Axios. “I’m not ashamed. I do believe in conscientious capitalism.”
“I’m not going to use the word ESG because it’s been misused by the far left and the far right,” he added.
Other states have also taken funds out of BlackRock’s investment managers’ hands, including Louisiana and Missouri.
Texas passed a law barring the state from contracting with companies that have seemingly divested from non-renewable energy producers.
Upon releasing a list of such firms, Texas Comptroller Glenn Hegar stated, “The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.”
“This list represents our initial effort to shine a light on entities that are engaging in these practices and create some clarity for Texans whose tax dollars may be working to directly undermine our state’s economic health,” Hegar said.
Still, as reported by The Dallas Express, BlackRock currently manages about $9 billion of the $56 billion in assets belonging to the State of Texas’ Permanent School Fund, resulting in criticism of the fund’s leadership.
