BlackRock founder, chairman and CEO Larry Fink said his plans to empower clients with choice on ESG voting is about delivering “long-term, durable returns for shareholders” and is not a social, political or ideological agenda.
In his annual letter to the CEOs of companies BlackRock invests in on behalf of its clients, titled The Power of Capitalism, Fink said stakeholder capitalism is not “woke” but driven by mutually beneficial relationships companies rely on to “prosper”.
“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke’,” he wrote.
“It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.”
It follows the decisions to give institutional clients of the world’s largest asset manager – roughly 40% of BlackRock’s $4.8trn equity index assets – the chance to vote directly with companies, instead of the firm partaking itself.
From 1 January, certain institutional clients, including pension funds supporting 60 million people, were given the option to vote at shareholder meetings and plans to give the option to every investor.
However, the move was criticised in some circles who argued the decision to expand proxy voting rights makes it appear a good corporate governance actor by furthering shareholder democracy but also means it can deflect criticism it normally receives for not using its large voting power in more activist ways.
Despite this, Fink wrote stakeholders now expect companies to play a role in decarbonising the global economy, calling it the main factor in a company’s capital allocation decisions in the years ahead.
“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients. That requires understanding how companies are adjusting their businesses for the massive changes the economy is undergoing,” he wrote.
“Every company and every industry will be transformed by the transition to a net-zero world. The question is, will you lead, or will you be led?”
“Stakeholder capitalism is all about delivering long-term, durable returns for shareholders. And transparency around your company’s planning for a net-zero world is an important element of that.”
Fink reiterated calls made he made at COP26 in Glasgow last November, warning that we must bring private capital on the journey to net-zero or risk “the biggest capital arbitrage in our lifetime”.
“Divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero,” he wrote.
“BlackRock does not pursue divestment from oil and gas companies as a policy. We do have some clients who choose to divest their assets while other clients reject that approach. Foresighted companies across a wide range of carbon-intensive sectors are transforming their businesses, and their actions are a critical part of decarbonisation.”