Last week, BlackRock CEO Larry Fink made headlines for calling Republican presidential candidates “Pinocchios.” He hurled the schoolyard insult after a number of candidates called out the world’s largest asset manager for using client funds to push its environmental, social and governance (ESG) agenda during the Republican presidential debate.
“One candidate last night claimed that BlackRock was somehow deterring American energy companies from drilling for oil,” Fink wrote on Linked In, apparently baffled by the charge. “Another candidate accused BlackRock of pursuing an ideological agenda.” Neither is true, the BlackRock executive pleaded. It’s all part of a “misinformation” campaign.
But is it?
Let’s look at the facts. Under Larry Fink’s leadership, BlackRock supported a coup to replace three members of Exxon’s board of directors with climate activists from a group called Engine No. 1. The group’s goal? “[The] near elimination of conventional fossil fuels,” per a document accompanying its investor outreach. Exxon, of course, opposed the takeover. But with BlackRock’s backing, the group prevailed. Almost immediately, Exxon slashed its production targets by 25%, promising to keep oil output at two-decade lows through 2025. The climate group called the reductions an “early win.” Maybe Fink forgot?
But does that mean he forgot what happened at Chevron too? Chevron faced similar pressure to reduce its oil drilling, this time from a Dutch nonprofit called Follow This, whose goal is to “push Big Oil to go green.” To do so, the group submitted a shareholder proposal asking Chevron to cut its total greenhouse gas emissions, including so-called Scope 3 emissions from cars and trucks that use Chevron’s gas.
Chevron’s board opposed the measure, explaining it wouldn’t help company shareholders. But BlackRock supported it nonetheless, saying BlackRock “believes that companies in carbon intensive industries should aim to set scope 3 emissions reduction targets.” With BlackRock’s backing, the measure passed. Within months, Chevron announced a new “net zero aspiration” policy and pledged $10 billion to renewable projects. BlackRock’s disdain for fossil fuels could not be clearer.
To claim otherwise, Fink pointed to a new “joint venture with one of America’s largest energy companies to help develop new technology.” That certainly seems like good news. Maybe BlackRock has turned a new leaf, and is helping fossil fuel companies invest in new drilling technology or more efficient ways to mine coal.
But that’s not what this “new technology” is. It’s machinery designed to fight global warming by taking carbon out of the atmosphere. A wildly expensive air purifier, if you will. The other half of the joint venture, the U.S. energy company Occidental, explained the purpose of the technology was to “provide a solution to help the world reach net zero.” Not to increase profits for BlackRock or Occidental’s investors. Which, to be clear, it is extremely unlikely to do. As Bloomberg explained in October, the economics of these projects don’t hold up. Oil companies view them as a social “license to operate”—something BlackRock demands of its portfolio companies.
In other words, when BlackRock’s PR department was scrambling to find an example of how BlackRock supports drilling, the best it could come up with was yet another example of how BlackRock forces fossil fuel companies to divert their money to environmental causes instead.
That’s not by accident. BlackRock is an active member of several ESG investor groups—including the UN Principles for Responsible Investing (UNPRI) and Climate Action 100+ and Investor Group for Climate Change (IGCC)—through which money managers agree to use their financial clout to push companies to adopt environmental and social goals.
Which brings us to Fink’s next claim, that BlackRock has never pursued an “ideological agenda.” Suspicious, coming from one of the most prominent signatories to the Business Roundtable, an organization that redefined the purpose of a corporation to move “away from Shareholder Primacy” and include a “commitment to all stakeholders.”
And Fink’s made good on that promise. BlackRock, for example, has continually pushed companies to adopt diversity goals, stating as recently as October that “we have a floor of two women” on company boards. If that quota isn’t met, BlackRock starts voting against the company’s preferred directors, however well qualified.
BlackRock has also supported racial equity audits, which push companies to adopt race-based hiring practices and prioritize diversity, equity and inclusion (DEI) initiatives over business goals. One recent proposal targeted Apple, asking the company to hire a civil rights auditor to assess “how [Apple] contributes to social and economic inequality” and force Apple to “identify, remedy and avoid adverse impacts on its stakeholders.” Apple’s board opposed the audit, but BlackRock voted for it anyway. How any of this is supposed to maximize Apple’s share price for BlackRock’s clients is anyone’s guess.
Then there’s the highly politicized debate over Second Amendment rights. Rather than stay out of the fray, BlackRock has called on gunmakers and retailers to voluntarily restrict sales to promote safety, explaining that it is BlackRock’s role to “drive change” in the industry “in light of evolving societal expectations.” Even a fellow ESG-promoting asset manager thought these efforts went too far, commenting that “mutual funds are not optimal agents of social change.”
Sometimes BlackRock’s political activism is even more overt. The firm vocally opposed voting laws in states like Georgia, calling it “discriminatory” to require voters to show ID. BlackRock likewise fought a Texas bill regulating transgender access to public bathrooms, claiming it “deliberately limit[s] the human rights of LGBT people.” And BlackRock has long courted controversy by lobbying Congress on behalf of China. Since then, its advocacy has only increased. Last year, BlackRock spent over $2 million dollars on political lobbying. This year, it added three more lobbying firms to its bench. The firm constantly inserts itself into political debates, and only on one side.
The list could go on, but the point is clear: Fink’s claim that “[t]he only agenda we have is delivering for our clients” is, frankly, malarky. He called the presidential candidates chastising BlackRock Pinocchios, but they were actually trying to be his Jiminy Cricket.
Matt Cole is the CEO and CIO of Strive Asset Management