Larry Fink, BlackRock’s chief executive, lamented in an interview with Bloomberg during his visit to Davos this week that in his entire career he had never been in a situation where he was personally attacked. The largest investor in the world complains about the polarization that revolves around decarbonization, which has become one of the main lines in the giant’s engagement and voting policies. For ‘green’ activism all the steps they are taking are insufficient and a marketing ploy, but for climate change deniers Fink has become a public enemy of the oil and gas sector and a political target to be beaten.
BlackRock and Fink are going through a bit like Greta Thunberg. In Western Europe, which is deficient in gas and oil, she fits in very well, but in the United States not so much. Donald Trump clearly exemplified this with his inappropriate gestures when the activist delivered her speech to world leaders at the UN in 2019. She was then a hero in Europe and as such was received in Madrid at COP 25, but a few years later she has gone losing prominence, erasing himself from climate conferences, and if it weren’t for his arrest this week in Germany, few would remember who was one of the most visible faces in the fight against climate change.
For the moment, nobody forgets Fink and, as happened with Greta, he has gained special prominence for appearing in the target of the Republican wing in the United States. BlackRock’s ESG focus is at odds with a party that rules in several states where the oil and gas industry is heavily weighted economically and its recent majority in the US House of Representatives anticipates that the pressure will continue and that the criteria environmental, social and governance will continue to be challenged. Also, expensive son.
Last year several red states withdrew investments they had delegated to BlackRock over its ESG approach. They were not crumbs, they were nothing more and nothing less than more than 3,000 million dollars (only Florida has withdrawn 2,000 million). The figure by itself does not say anything, but the volume of assets lost due to Republican revenge is only exceeded in Spain by 41 fund and pension plan managers out of the 117 that were operating at the end of September, it is true that although it is a small part of the almost 9 billion dollars with which the giant said goodbye to the year.
The revenge of the Republicans has cost BlackRock more than 3,000 million dollars
The CEO of the largest investor in the world -who has already announced layoffs-, defended in Davos (and has also done so in a marketing campaign in the US) that they were not enemies of gas and oil, but that his objective was to accompany them in its transition (a plan that by the way fits perfectly with the democratic program). One of the pillars on which responsible investing rests is that companies with strong ESG criteria will return more in the long term because these pillars limit their risks and Fink seems to stick to this mantra.
Now it will be necessary to see if he takes a step back in his famous annual letter to the CEOs of the firms in which he participates, which in recent years has been very focused on climate change. In 2022, in the midst of the war in Ukraine, it already took a small step back when it advanced that it would be more demanding when it comes to supporting ESG proposals from third-party shareholders. He did so in the midst of a debate on the need to preserve energy security in the West in the face of the conflict with Russia. Fink has only advanced that his 2023 letter will speak of “hope”, but we do not know if he will follow the example of other climate activists and refocus his strategy somewhat, in the midst of a polarized debate between good and bad, which each has led to their own. terrain and that, as happens in politics, does not admit gray scale.
The best-known pro-climate investor in Spain –Chris Hohn- is in fact mutating. The Children’s Investment Fund (TCI), a shareholder in companies such as Aena, Ferrovial or Cellnex, became known for a pro-climate campaign, which was especially virulent in the case of the manager of Spanish airports. I involve Teresa Ribera in it, urging her to approve a green spin from Aena, which the minister bought and which has been reflected in the fact that sustainability is part of the statutes of the listed company and in an emissions reduction plan voted on by a meeting, which conditions its business strategy for the future.
The origin of that campaign occurred in 2019, at the height of Greta Thunberg, with a wave of letters sent by TCI to numerous companies. In addition to Aena or Ferrovial, the list of targets was much broader and affected almost twenty stocks, including giants such as Alphabet, Microsoft, Moody’s, Atlantia or Vinci.
But TCI’s activist profile is changing. It is difficult to know how far he has influenced Cellnex’s strategic turn, which has resulted in the departure of Tobías Martínez as delegate, but he could enter into his new ‘modus operandi’, since last year he took a step that He was far removed from the activism for which we knew him: the ESG. In November, I wrote a letter to Alphabet explaining that, from their point of view, the company had a high cost base, referring to both the number of workers and their salaries.
In the letter, signed by Chris Hohn himself, he pointed out that he shared the idea of other firms that Alphabet’s numbers could be achieved with fewer human resources and gave as an example the step of other technology companies, such as Meta or Microsoft, which were opting for reduce (and very drastically) their templates. In parallel, he demanded that the technology giant be more generous in its stock reward plans, in a strategy more typical of Carl Icahn than the Hohn to which we had become accustomed.
If Hohn had been very uncomfortable for the companies in which he participates due to his climate approach, with this turn towards classic (financial) activism, the ESG industry could also be turned against him, which is trying to shape how to approach the inclusion of social objectives in its investment manual and that, with a European vision, it is protectionist with regard to employment and less open to applauding free dismissal. But at the same time, isn’t it logical that he implements tools that try to encourage the profitability of his investments? It would be what a third party would probably ask of you.
Crises often serve to test investment models and the unexpected war in Ukraine and the rise in world inflation after the pandemic are applying a true stress test for ESG criteria, which seemed to have become the only possible path . it had probably grown too fast and claimed itself too early as a hero and the only possible way forward to markets.
However, investors are not philanthropists and it has become clear that when the red numbers tighten, swerves occur. After a period of reflection, and despite the detractors and the errors of immodesty, without Greta, Fink or Hohn it would have been much more difficult for the energy transition to gain so much visibility in companies and at the political level. Now it is integrated into the business strategy of many companies, that it seems difficult for them to abandon the race completely. Maybe they could slow down if the pressure drops.
What investors need is that there really are stimuli that make decarbonizing companies profitable because profitability is often a good excuse to call in extremists. The Democrats are counterprogramming the Republicans with green investment stimulus programs that will attract investors and businesses, if not out of conscience, then out of expectations of return. In Europe, for now, the discourse is more aligned, but the requirements for gas have already been relaxed, giving it a very critical halo of sustainability in the taxonomy of sustainable activities, and green investment will be encouraged so as not to lose the race against the United States .
There will be an energy transition if it is profitable. The heroes, the villains, and you and me know it. Losing money for political color is only tolerated by a few.
