IN-DEPTH: BlackRock CEO Says He‘ll No Longer Use ’ESG' Term

Critics say ‘time will tell’ whether it’s a real policy change or a rebranding of the same agenda

BlackRock CEO Larry Fink attends a session at the World Economic Forum annual meeting in Davos, Switzerland, on Jan. 23, 2020. (Fabrice Coffrini/AFP via Getty Images)

BlackRock CEO Larry Fink, one of the most powerful figures on Wall Street and an outspoken champion of progressive causes, appeared to be backpedaling this week on his support for the environmental, social, and corporate governance (ESG) movement, saying he would no longer use the term.

“I’m not going to use the word ESG because it’s been misused by the far left and the far right,” Fink told attendees of the Aspen Ideas Festival on June 25, adding that he was “ashamed of being part of this conversation.” He also decried “personal attacks” that have come in response to some of the positions he has taken.

But many who have led the charge against ESG investing say they are waiting to see whether this indicates that BlackRock, the world’s largest asset manager, with more than $8 trillion in funds under management, has changed its ways or is simply attempting to rebrand the same policies.

“I think he’s caught some heat from some folks,” Florida Chief Financial Officer Jimmy Patronis told The Epoch Times. “Maybe he’s needed to try to find some way to camouflage his messaging because there’s definitely been some criticism.”

“I am encouraged by the change in rhetoric; however, BlackRock’s actions over time will be more telling,” Utah State Treasurer Marlo Oaks told The Epoch Times. “We are watching BlackRock’s corporate engagement and how they are voting their proxies.”

The Power of Proxy Voting

Proxy voting refers to how BlackRock votes on the corporate shares that it manages for others. Currently, about three-quarters of all shares in U.S. publicly traded companies are held by institutional fund managers in the form of index funds, mutual funds, and pension funds, and not by individual investors.

This gives fund managers such as BlackRock, Vanguard, and State Street, the so-called big three, tremendous power and influence over companies. Because of the popularity of its index funds, for example, Vanguard is the largest shareholder in 330 of the companies in the S&P500 index.

And while many view the ESG movement as shunning disfavored companies, such as oil, gas, and coal producers, progressive asset managers often are able to exert more influence by following a buy-and-hold strategy and using their voting power to influence company management. A high-profile case in point was a 2021 shareholder vote, which the “big three” supported, to put climate activists on the board of ExxonMobil and push the oil company toward investing in wind and solar power over fossil fuels.

“We’ve watched BlackRock’s proxy voting within shareholder proposals this year,” Derek Kreifels, CEO of the State Financial Officers Foundation, told The Epoch Times. “[Fink’s] behavior has not changed. He is still trying to force behavior on companies they’re investing in.”

Fink stated at a New York Times conference in 2017, regarding the ESG agenda and diversity, “You have to force behaviors, and at BlackRock we are forcing behaviors.”

As an index fund manager, Fink said: “We are the ultimate long-term holder; we have to own all the companies that are in an index. If you’re an active manager and you don’t like a company, you can sell it.

“I can’t sell. I have only one power and I’m going to use that power heavily. And that’s the power of the vote.”

“Only time will tell, but I’m very skeptical that this is a sincere change of heart,” Will Hild, executive director of Consumers’ Research and a frequent critic of ESG investing, told The Epoch Times. “Larry has been so vociferous in bragging about the ways he throws his weight around with the amount of money he has under management.

“I’m not surprised that they would ditch the term [ESG]. This is typical of their response to the pushback they’ve been getting. It’s been to talk out of both sides of their mouth, depending on who they’re speaking to at the time.”

Fink is known for writing an annual letter to CEOs, several of which have focused on ESG issues and the transition away from fossil fuels, though that is largely absent from his 2023 letter.

In a June 7 interview with The Australian, Fink said, “My letters have become weaponized.

“When I wrote these letters, it was never meant to be political. Every letter was written to our clients and to our shareholders with the idea that we’re trying to be a voice of the long term.”

In a June 8 interview with the Australian Financial Review, Fink said that the red state anti-ESG campaign’s withdrawal of about $4 billion of assets from BlackRock funds was dwarfed by $400 billion of inflow from other sources, which, according to BlackRock, reflects the trust that investors have in the firm.

In his 2023 letter, Fink wrote: “To ensure the continuity of affordable energy prices during the transition, fossil fuels like natural gas, with steps taken to mitigate methane emissions, will remain important sources of energy for many years ahead. BlackRock is also investing, on behalf of our clients, in responsibly-managed natural gas pipelines.”

ESG Seeing Setbacks

While ESG investing has been a popular trend among fund managers, growing from $19 trillion in assets in 2014 to a projected $67 trillion in 2023, the past year has seen some setbacks. A number of states, including Utah, Kentucky, West Virginia, Arkansas, Montana, Texas, and Florida, have taken steps to block public pension money from being used to support ESG, and red state attorneys general have initiated anti-trust investigations.

In addition, New York City employees, including a teacher and subway operator, sued the municipal pension fund managers for what they allege are diminished returns on their pension funds as a result of ESG investing. Many financial firms and corporations signed on to various activist climate clubs in the heyday of ESG, but this year, there have been a number of key withdrawals.

Vanguard withdrew from the U.N.-sponsored Net Zero Asset Managers initiative in December 2022, and so far this year, half of the members of the Net Zero Insurance Alliance have left the club. Among the concerns cited by insurers were possible anti-trust actions, given the coordinated action of members against industries such as fossil fuels, which is likely illegal under U.S. anti-trust laws.

“I would say we’re in the early innings of this fight against ESG,” Hild said. “But consumers and American citizens should feel very empowered about just the changes that have been made in a short period of time.”

At the Aspen Ideas Festival, Fink was reportedly pressed to clarify what he meant by “ashamed” regarding ESG.

“I never said I was ashamed,“ he reportedly responded. ”I’m not ashamed. I do believe in conscientious capitalism.”

The state of Florida divested $2 billion from BlackRock funds in 2022, stating that they want investment earnings to be the top priority.

“It’s always been about returns for me,” Patronis said. “When you consider how much responsibility Fink has, when he’s got trillions of dollars, in trying to influence politics, and those dollars aren’t his. They belong to first responders, they belong to retirees, they belong to those trying to set up a future with peace of mind.

“I put BlackRock in the same category as what Budweiser has been dealing with with Bud Light. They have forgotten who their customer is, and now they step into politics and have gotten themselves in a real pickle.”