by Mish Shedlock, Mish Talk:
Climate investing is still booming at BlackRock, but don’t call it ESG.
Blackrock, the world’s biggest asset manager abandoned ESG investing after a wave of complaints against “woke capitalism” that made the term politically toxic.
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Please note, BlackRock CEO Larry Fink Is Doing ‘Transition Investing’ Now.
BlackRock is still wagering that fighting climate change will be a generational investment opportunity—but the company is no longer pushing for changes in corporate behavior, talking about hard-to-quantify social issues or actively promoting ESG investing criteria. Instead, it is directing billions of client dollars toward infrastructure projects that will help speed the transition from fossil fuels.
“Transition investing is specific and concrete. Clients know what we’re talking about,” said Mark Wiedman, who is head of the global client business at BlackRock and a potential successor to Fink. “ESG as a category is a vague grab bag for many clients.”
BlackRock is joining investors such as Brookfield Asset Management in betting on clean-energy infrastructure projects. It doubled down with its recent $12.5 billion deal to buy Global Infrastructure Partners, an infrastructure fund manager that owns and operates energy, transportation, and waste and water companies around the world.
BlackRock’s infrastructure funds have invested in solar power, natural gas made from food waste and cow manure and removing carbon from the atmosphere.
The criticism of Fink started building in 2020, when he wrote in his widely read letter to CEOs that “climate risk is investment risk.” He said BlackRock would be disposed to vote against management and boards at companies that weren’t making progress on sustainability-related practices. The company’s colossal index-fund business makes it among the three largest shareholders in most companies in the S&P 500, so it wields vast shareholder voting power.
A year later, Fink upped the ante when he wrote that BlackRock was “focused on racial equity and social justice in our investment and stewardship activities” and that “advancing a more equitable and inclusive environment” would require going beyond just examining its own culture and talent practices.
The backlash was swift. Even Berkshire Hathaway’s Charlie Munger said: “I think the world of Fink, but I am not sure I want him to be my emperor.”
Conservative activist Leonard Leo financed a multimillion-dollar campaign to stoke opposition to ESG. It led to jabs from Republican presidential candidates and efforts by some Republican states to ban BlackRock from doing business there.
“ESG is unquestionably in a death spiral,” said Terrence Keeley, who ran BlackRock’s official institutions group until 2022 and has since published a book criticizing ESG investing. “BlackRock is logically prioritizing decarbonization because it is a win-win-win. Good for the environment, good for investors and good for BlackRock shareholders.”
ESG is Out, Transition Investing Is In
So it’s good riddance to ESG investing, hello to transition investing.
Blackrock’s investment focus did not change. But its woke push for racial equity and social justice in investment and stewardship activities did.
