BlackRock looks to be in some trouble. It’s assets under management have fallen from $10-11 trillion to $8 trillion, with profits falling 16 percent in the third quarter. Much of this is the result of falling markets, but for BlackRock, that's no excuse because it and its CEO Larry Fink have been so integral in pushing the policies and creating the conditions that have caused markets to fall.
Some of the drop has also come from withdrawal of assets, particularly by red states and their pension funds. In recent days, South Carolina, Louisiana and Missouri have withdrawn more than $1 billion in funds. There’s every reason to expect that more will follow as the economy slows and the partisan and incoherent nature of BlackRock-based investments become clearer.
Sizing up the situation, UBS recently downgraded BlackRock from buy to neutral and reduced its stock price target by more than 17 percent – a price still not as low as the one that BlackRock was trading at last week. In its message, UBS indicated that it expected more significant withdrawals from BlackRock to occur and for regulatory, investigative and legislative risks to increase.
In response to all of this, BlackRock has thrown up a new webpage claiming to “set the record straight” on the investment house’s “energy investing.” Instead, though, the information on that page (and in a lengthier letter from BlackRock to state attorneys general) muddy the issues at stake and demonstrate just why UBS is right – perhaps more than it realizes – in its decision to downgrade BlackRock.
The misdirection starts with the title of the “report” and its opening salvo. Aimed at “setting the record straight on energy investing,” the introduction asserts:
The energy industry plays a crucial role in the economy, and, on behalf of our clients, BlackRock has invested $170 billion in U.S. public energy companies. We are also partnering with energy companies and start-ups to fund new technology and innovations that will power the global economy, now and in the future.
Despite these investments, BlackRock has recently been accused of “boycotting” oil and gas companies.
We’re setting the record straight about our focus on energy investing, our responsibilities to clients and how we consider climate risk.
As you can see, the misdirection and misinformation begins right away. States have been withdrawing assets from BlackRock because BlackRock discriminates against reliable energy like oil, gas and coal. The first sentence in BlackRock’s effort to “set the record straight,” then, is a non sequitur. What BlackRock invests in all energy companies – even unreliable-energy companies – is irrelevant, because the objection is that BlackRock discriminates within the energy sector.
The second sentence, meanwhile, is an oblique admission that the states are right in their discrimination claims, because even in a presentation designed to allay concerns of fossil-fuel discrimination, BlackRock can’t help boasting that it is “partnering with energy companies and start-ups to fund new technology and innovations that will power the global economy, now and in the future.”
Given what we all know about BlackRock and about the Hubris of Larry Fink, what do we reckon? That these investments are in technologies to make fracking more efficient or make coal burn cleaner? Well, no. I’ll bet a month’s wages that those investments go primarily to fruitless efforts designed marginally to improve “renewable” energy sources the adoption of which can make no difference to climate so long as only the West is doing the adopting but can, as Europe has discovered, render us helpless on the world stage.
The next line – in headline-size bold type – declares that “[w]e are helping 35 million Americans achieve their investment goals,” followed below – in smaller type – by a claim that “we offer investment strategies consistent with their goals and preferences.” This, though, is false in general and particularly false in the context of fossil-fuel discrimination.
The company offers investors both ESG-labeled and non-ESG-labeled investment options, but then it uses the power of all $10 tr … oops, $8 trillion under investment with the company to push its ESG goals, including decarbonization on a Mike Bloomberg, United Nations, climate-catastrophist timeline. This isn’t helping investors meet their communicated goals (i.e., the interests of a small minority of investors in “renewable” energy investment versus the interest of the vast majority in best-energy investment). It is hijacking the power of those all of those assets to achieve Larry Fink’s personal policy preferences. (His preferences for those who foolishly trust him with their capital and for the rest of us, I mean. He notably continues to fly the world in a private jet and live in a mansion. Not for him the brutal constraints on human flourishing and comfort that will necessarily follow if his politicized decarbonization goals are realized.)
The company then moves on to assert that it focuses on “climate risk” in order to “drive financial outcomes for clients,” by “providing clients with insights on short- and long-term trends in the global economy that can impact their portfolios.” Again, though, this is not what BlackRock is doing. Instead, it uses all of the assets invested with it to pressure companies into malinvestment – shifting to “clean, renewable” energy sources – which are neither, and are unreliable and insufficient to boot – without regard to the label slapped on the investment.
In doing so, the company is again advancing not the best investment strategies but executive personal-policy preferences, because if “climate risk” must be addressed by the company, so must all other relevant risks, including energy-unreliability risk, error-in-the-climate-model risk, geopolitical risk, and the like.
By privileging climate risk, and specifically a very narrow and hyperventilative take on climate risk, BlackRock violates its duties of care and of loyalty: it fails to be complete and unbiased in its analysis and its actions on behalf of investors. This is exactly why red states are, quite properly, withdrawing their funds from BlackRock.
These facts – this breach of fiduciary duty by BlackRock in pressuring companies – reverses the import BlackRock’s next defense. The company asserts that “[o]ur views on climate risk are not unique … in 2020 more than 90% of the S&P 500 published sustainability reports.”
Well, yes, Larry, they sure did. And they’re weirdly myopic sustainability reports, too, unheeding of the likelihood that the UN models are profoundly flawed; that decarbonization is meaningless if only the West does it; that political-schedule decarbonization could destroy the middle class while putting the relatively free nations at terrible geopolitical risk. But Larry, the fact that they did is by your own prideful admission, largely your doing. Do you recall declaring that you were using all of the assets invested with BlackRock to “force behaviors” on the companies BlackRock invests in?
BlackRock can hardly use the fact that it forced companies to follow Fink’s personal policy preferences to create biased and meaningless pro-“renewable” reports as a defense against claims that BlackRock is using investor assets to force Fink’s personal policy preferences in energy-type discrimination. Once again, this assertion provides evidence against BlackRock, not for it.
BlackRock continues to “set the record straight” for a few more paragraphs, but the conclusion does not alter: The company has set the record straight, but that record reveals a company that violates its fiduciary duties in order to push its CEO’s personal policy preferences while lying about it. That’s the BlackRock record.
Given all of this, it is pleasing to report that the states that have recognized BlackRock’s misfeasances have not backed down. States continue to withdraw their investments. More will likely follow.
The 19 state attorneys general who explained to BlackRock this summer that its “mixed motive” investing (mixed between pretending not to invest according to Fink’s personal policy preference and his just admitting that that’s what BlackRock is doing) violates the company’s fiduciary duties have not backed down, and have in fact opened investigations into too-big-to-fail banks that are following similarly politicized strategies.
And should events in a few weeks’ time change the Washington color scheme, it's very much to be hoped that federal investigations into BlackRock and the banks will begin as well.
The odds increase that BlackRock’s record will be set straight before too very long. But as a different (and actually anointed) emperor with dreams of world domination discovered to his cost some decades ago, that straightening will likely proceed “not necessarily to” BlackRock or Larry Fink’s “advantage.”