News Analysis

BlackRock CEO Larry Fink gets a warning on ESG

by Dan Byrne on Dec 8, 2022

BlackRock CEO Larry Fink is facing a fresh headache this week, as an activist investor has publicly sought his resignation in a sharp criticism of his corporate leadership. 

Fink, who co-founded the company in 1988, has been asked to leave by senior figures in Bluebell Capital Partners. It’s an organisation with a track record of attacking senior figures for perceived ESG failings. 

Broadly, BlackRock is caught in a polarised political dilemma, and this latest development may be a pivotal warning. If your firm gets swept into politics, your governance will come under fire.

What’s going on?

Top leaders in Bluebell have written to Fink and asked for his resignation. Their main gripe is that BlackRock’s ESG record has been inconsistent. 

Investing in fossil fuels while touting sustainability commitments is just one example. 

Bluebell’s co-chief investment officers Giuseppe Bivona and Marco Taricco told Fink that there was an “apparent hypocrisy” in how it approached ESG criteria, which it said had “alienated clients.”

“The reputational damage of being dragged into this politically charged debate, is very significant because it calls into question the independence of BlackRock as an asset manager,” the letter said.

Bluebell’s criticism:

“We see BlackRock endorsing a number of bad practices from governance, social and environmental perspective, which is not exactly in tune with what they say,” Bivona said in a recent interview with CNBC.

BlackRock’s response:

BlackRock has played the dismissal game, effectively saying that Bluebell’s tactics have happened before and will happen again. It did not acknowledge any plans to comply with the request. 

The firm noted that Bluebell had “waged a number of campaigns” in the last year and a half and that BlackRock disagreed with their message because “we did not consider them to be in the best economic interests of our clients.”

What does it mean?

BlackRock is the world’s largest investor and makes governance – particularly ESG – a centrepiece of its investment criteria. So, it can’t come as good news that its governance and ESG logic is coming under fire. 

What’s more, though, is that BlackRock is under sustained fire from both sides of the ESG debate. 

Bluebell is unhappy that its ESG principles are inconsistent, but many fiscal-right politicians, particularly in the United States, have blasted the company for having any ESG principles at all. They maintain that it’s an undeserved attack on the fossil fuel industry and harms stakeholder return.

In effect, BlackRock now finds itself in the middle of a politicised tug of war. No company will ever want its core principles swept up into polarised politics – particularly a debate as volatile as ESG’s place in our corporate future.

What should we take from this?

The bottom line is that BlackRock CEO Larry Fink has earned critics on both sides of ESG. It’s only natural that his corporate strategy and governance will come under fire. 

It is challenging but not entirely avoidable, given BlackRock is such a large firm with a vocal policy around ESG. 

Is it a sign that any large firm with robust ESG policies faces a governance grilling? No. 

But it may be a sign that robust ESG policies will put governance under the microscope, as investors will want to see the method behind major decision-making. From this process, expect criticism.

Lastly, will Bluebell’s campaign succeed?

It doesn’t appear so. Bluebell owns nothing close to a significant stake in BlackRock (estimates currently land at 0.01%), and Bivona refused to give a specific number when pressed in his CNBC interview. 

It would suggest more posturing at this point than a drive for results. 

That said, don’t rule out their efforts entirely yet. Bluebell was instrumental in the resignation of Danone’s chief executive Emmanuel Faber in 2017, even though it owned a small stake in that company. 

Ultimately, it all depends on whether other investors echo Bluebell’s thoughts.

ESG investing

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