BlackRock CEO Larry Fink, who has long advocated for responsible environmental, social, and governance (ESG) practices, recently announced that he will no longer use the term “ESG.” In a speech at the Aspen Ideas Festival, Fink stated that the term had been “misused by the far left and the far right” and had become “totally weaponized.” This decision reflects the intense debate surrounding ESG investing and its implications for companies and investors.
Over the past decade, Fink has been a prominent advocate for incorporating ESG factors into investment decisions. In his annual letters to investors, he emphasized the financial risks posed by climate change and urged companies to disclose their plans for transitioning to a net-zero economy. However, these efforts have attracted criticism from both ends of the political spectrum.
Critics on the right accused Fink of promoting “woke capitalism” and undermining traditional industries such as oil and gas. On the other hand, some on the left argued that BlackRock itself had not done enough to reduce its exposure to climate-related risks. These criticisms culminated in public protests and attempts by state officials, like Florida Governor Ron DeSantis, to withdraw public pension funds from BlackRock as a form of punishment for its ESG stance.
Fink’s frustration with the backlash is evident in his recent statements. He clarified that his annual letters were never intended to be political statements but rather aimed at addressing long-term issues for BlackRock’s investors. Fink has argued that the term “ESG” has been politicized and weaponized, leading him to avoid using it in his latest CEO letter.
His concerns about the weaponization of ESG are shared by others in Washington. Representative Andy Barr, a Republican from Kentucky, sees Fink’s remarks as a victory for those opposing the ESG trend. Barr praised Vanguard’s decision to withdraw from the Net Zero Asset Managers initiative, a climate-focused consortium, as evidence that the Republican effort against ESG is gaining traction.
The political pressure on the topic is expected to increase in the coming weeks. Barr and other House Republicans have declared July as “ESG month” and plan to introduce bills and hold public hearings on the issue. This indicates that the debate over ESG investing is far from over and will continue to shape the financial landscape.
Fink’s frustrations also reflect a broader pushback against shareholder proposals related to ESG issues. Conservative-leaning shareholders have increasingly submitted anti-ESG resolutions, leading to a significant rise in such proposals during recent proxy seasons. Shareholders are expressing their opposition to certain pro-ESG measures as well. For example, this year, investors rejected shareholder proposals that sought more disclosure about the risks faced by companies due to restrictions on abortion rights.
The ongoing discussions and debates around ESG investing highlight the complexities and divergent opinions surrounding this approach. While some view it as essential for addressing long-term risks and creating sustainable business practices, others see it as a politically motivated agenda that hampers economic growth. The future of ESG and its role in investment decisions will continue to be a subject of intense scrutiny and deliberation.