No mention of ESG as BlackRock’s Fink drops long-awaited annual letter

BlackRock chief mounts defence of firm's demands for more disclosures, but argues that managers should not try to engineer economic outcomes.

Larry Fink mounted a defence of BlackRock’s actions on the energy transition in his long-awaited annual letter published on Wednesday, but explicit mentions of ESG were absent.

In previous years, Fink had written separate letters to CEOs and to BlackRock investors and clients, but this year’s edition is only addressed to investors. Fink said the CEO letter had been dropped as the firm’s investors and stakeholders “are facing so many of the same issues”.

The introduction, which heavily emphasises the theme of choice, dances around the topic of the ESG backlash in the US, but doesn’t address it explicitly. “There are many people with opinions about how we should manage our clients’ money,” says Fink. “But the money doesn’t belong to these people. It’s not ours either. It belongs to our clients, and our responsibility and our duty is to them.

“We see opinions diverging across regions – including the US and Europe – and even within regions – especially in the US.” He notes that this creates challenges for the “truly global” BlackRock. However, he claims that the firm’s diverse offerings, global perspectives and client-centric approach remain “powerful competitive advantages”.

Previous years had seen the CEO letter released in mid-January. The delay this year prompted widespread speculation as BlackRock continues to come under fire in the US over ESG.

Fink does not shy away from discussing sustainability-related topics in the letter – which runs to over 9,000 words – with the energy transition receiving its own section. He argues that, over the long run, investors will need to consider how the energy transition will impact the economy, asset prices and investment performance, highlighting the physical impact of climate change across the world.

Again, the section does not explicitly address criticism by US politicians, but notes that BlackRock has “clients who want to invest in ways that seek to align with a particular transition path or to accelerate that transition” and clients “who choose not to”.

BlackRock offers choice to help clients reach their investment goals, and assets are managed consistent with their objectives and guidelines, according to Fink.

He also defends a push by the manager for firm-level disclosures on emissions and transition plans, noting that “clients also want access to data to ensure that material sustainability risk factors are incorporated into their investment decisions”.

Economic engineering

While unrepentant about BlackRock’s disclosure pushes and serving client demand, Fink stresses that “it is not the role of an asset manager like BlackRock to engineer a particular outcome in the economy”.

He adds: “As I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police.”

The transition section also notes BlackRock’s continued investments in fossil fuels, including in “responsibly managed natural gas pipelines”.

All explicit mentions of ESG have vanished from the letter this year. The 2022 letter to CEOs contained a section on ESG voting and the firm’s voting choice offering, although it was absent from the client letter, while the 2021 letter to clients saw the term first appear in the second paragraph.

There is also no mention of racial justice or racial equity, which appeared in the 2021 and 2022 letters to CEOs. The word “sustainability” appears only once in the letter. In 2021, it appeared three times in the first paragraph alone.

Fink concludes his letter by reiterating the firm’s focus on returns: “Since BlackRock’s founding, we have always been unwavering in our commitment to serving our clients, and by doing so, we have delivered outsized returns for our shareholders.”