This comes after his company topped the list of 10 “fossil fuel divestors” by the State of Texas, priming the comptroller to begin removing public pension dollars from those financial entities.
“The tectonic shift [toward decarbonization] is happening,” Fink told the audience and the moderator, former President Bill Clinton. “We are seeing big shifts because of heat and drought — we’re seeing every day that climate risk is investment risk and people are waking up to that.”
“We’re not going to be able to get to a decarbonized world without the ability to sequest [sic] carbon… Because of the rising prices, we’re seeing the cost of the ‘green premium’ shrink quite considerably and so the amount of investment dollars going into new decarbonization technology is accelerating, and accelerating very rapidly.”
Energy prices are higher for a number of reasons, including government regulations causing oil and gas companies to avoid investing in new operations and facilities. In a survey by the Dallas Federal Reserve, one energy executive respondent said, “Government animosity toward our industry makes us reluctant to pursue new projects.”
Another contributing factor is the bottleneck in America’s petroleum refineries limiting the amount of supply to meet the recuperating demand.
These factors will only compound if more governments take up Fink on his call to action.
Fink then called on altering the operations of the International Monetary Fund (IMF) and the World Bank, a step he sees imperative to reaching decarbonization. This, he claimed, would accomplish the goal of moving an estimated $1 trillion of capital into the decarbonized sector, up from its current estimate of $100 billion.
“If we’re really serious about the notion of moving the world faster so our children and grandchildren can have that bright future, it has to be done in a way that we’re bringing all the governments together,” Fink added. “We have to re-look at the responsibilities and the role played by the World Bank and the IMF.”
Fink’s push toward reshaping the global economy is not new and he’s not the only player, but he is among the most significant given his position at the helm of the world’s largest portfolio manager.
ESG is a trend in the investment world moving capital toward companies that toe the line on certain causes like environmentalism, progressive social policies, and other priorities via an “ESG score” rating system. Texas is just one of the numerous red states pushing back against the ESG trend in the world of capital.
In his 2022 “Letter to CEOs,” Fink touted the marketability and profitability of the ESG movement. “The next 1,000 unicorns (market-changing companies) won’t be search engines or social media companies, they’ll be sustainable, scalable innovators — startups that help the world decarbonize and make the energy transition affordable for all consumers,” he said.
“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients.”
This led to a verbal rebuke from Lt. Governor Dan Patrick, who called for the financial titan to be added “to the top of the list” of fossil fuel “boycotters.” The Texas Legislature passed Senate Bill 13 in 2021 which prohibits state pension dollars from being invested in or with companies found to be sanctioning or divesting from fossil fuel companies — a task left to the comptroller.
Currently, the state pension systems are evaluating their holdings to find out how much funds have to be pulled and reinvested — a process that must be completed and reported to the comptroller by Friday, September 23.
As of June 2021, the Teacher Retirement System (TRS), the state’s largest pension, had nearly $7.5 billion in BlackRock holdings or investments.
BlackRock’s maintained it is not divesting from fossil fuel companies. In March, President Rob Kapito said that it oversees $93 billion of capital invested in fossil fuel companies.
But in the same breath, BlackRock touts its “sustainability” focus, granting the topic its own page on the company’s website while a different page focuses more acutely on “investing in the transition to a low-carbon economy.”
These two distinct messages have drawn the ire of state officials, including Comptroller Glenn Hegar. At the outset of the SB 13 process in January, Hegar said, “[A]s my office prepares the list of companies subject to the divestment provisions in SB 13, we are carefully monitoring the public statements made by companies and their leadership.”
“Telling the State of Texas one thing while telling coastal investors another will not shield a company from our process.”
Earlier this month, the financial titan publicized its operational change for pension systems: allowing those entities to vote shares differently than BlackRock or other proxy managers suggest.
BlackRock’s public statements have made it the vanguard of the ESG movement in the eyes of both supporters and critics. With continued statements like Fink’s, BlackRock will likely remain atop the foci of Texas’ Republican officials determined to prevent the “tectonic shift” Fink believes is inevitable.
Update: Comptroller Hegar sent a statement to The Texan in response to Fink’s comments. He said:
“Recently Blackrock CEO Larry Fink, Unilever CEO Alan Jope and one of the UN’s ESG Czars Damilola Ogunbiyi discussed the ESG trend with Bill Clinton on a panel at the Clinton Global Initiative’s September meeting. To put it bluntly, the discussion was alarming.
As Americans struggle with the choice of paying sky-high energy bills or putting increasingly costly food on the table, Larry Fink praised the rising cost of energy as a means of reducing what he calls the green premium — a convenient way of glossing over the outsized cost of his energy transition fairy tale. At another point in the conversation, Fink and Jope essentially admit to pushing an ESG agenda through a shareholder vote by using the shares and money of Blackrock clients to lead the effort.
And when it came to actually discussing the costs, Ogunbiyi points to the $17 trillion ‘we found’ to respond to the COVID pandemic. That is an astonishing comment given that money came from taxpayers or was printed by governments, and now working people around the world are paying for it. Billionaires like Mr. Fink aren’t phased when inflation is running at levels not seen for nearly half a century. He can still afford to fuel up his private plane even as farmers can’t afford diesel for their tractors or fertilizer for their crops.
Texas is fighting back. Blackrock is on our list of companies boycotting the fossil fuel industry. As I said at that time, our research uncovered a systemic lack of transparency that should concern every American regardless of political persuasion. Especially concerning is the use of doublespeak by some financial institutions as they engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors. We will shine a light on entities that are engaging in these practices and create some clarity for Texans whose tax dollars may be working to directly undermine our state’s economic health.”
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Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.