Asset Managers need to pick a side when it comes to ESG

published on 22 December 2022

An activist fund is targeting BlackRock, the biggest money manager, over its recent ESG commitments. The fund also wants Larry Fink, BlackRock co-founder and CEO, to step down.

A demonstration in front of BlackRock headquarters (credit @CNBC)
A demonstration in front of BlackRock headquarters (credit @CNBC)

What happened?

Each year, Larry Fink, the CEO of BlackRock, sends a letter to CEOs. He details his vision of the business environment and the challenges ahead. Over time, those letters have taken a "sustainable" turn, especially since 2019. Larry Fink is encouraging CEOs to link "purpose with profit" or to commit to a "net zero" transition.

But his letters have made everyone uncomfortable, to say the least.

Republicans are accusing BlackRock of being too "woke" and political and they are withdrawing more than $1 billion of investments from the company (BlackRock manages more than $10 trillion; they are fine).

Democrats and liberal movements are unhappy too. Larry Fink's letter created a massive hope for change. Yet BlackRock's actions are cantilevered. BlackRock opposed a lot of shareholders' proposals targeting climate in 2022 and the company is also accused of greenwashing the ESG financial instruments it is selling.

No one is happy...

This is where the activist fund comes into play. On Nov. 10, Bluebell, the activist fund, accused BlackRock of hypocrisy. It said that Larry Fink's statements are at odds with the company policy exactly why no one is happy, and putting the company at risk.

Why it matters?

Such action is big. BlackRock is the largest asset manager on the planet. With Vanguard and State Street, they own a quarter of corporate America. If BlackRock would change its overall investment strategy, this could send massive shockwaves to the market.

And BlueBell, the activist investor, is no small deal. They have successfully managed to change leadership in big corporations before. In 2021, the fund ousted Danone's CEO for being

Fink is in a tricky situation.

Having triggered anger on both sides of the aisle, there is little support to be expected from liberals or conservatives. There is little risk that he will get ousted but the activist will force him to clarify his and BlackRock's position.

Let's see what will happen...

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