26 Jul BlackRock Does What BlackRock Does, Redux
The following commentary/analysis is one I wrote in my capacity as a senior fellow at “the nation’s oldest consumer protection agency,” Consumers Research, where, among other things, I compile a weekly letter for public pension-fund managers. I am sharing it here today because I thought it might be useful to some of you.
Trump and Fink, Sitting in a Tree?
Last weekend, Charles Gasparino – the prominent business columnist for The New York Post – used his column to address the “odd (and interesting) relationship” between former President Donald Trump and Larry Fink, CEO of BlackRock, the largest asset management firm in the world. The purposes of Gasparino’s column were (at least) twofold: first, to notify conservatives that Trump doesn’t necessarily share their detestation of the public face of “woke capital,” and second, to convince them that that’s really not a big deal. He wrote:
[T]he uber-globalist BlackRock chief of ESG fame once [served] as Trump’s money manager, and the GOP populist former president (and according to polling, likely future prez) still [seeks] out Fink for insights into the economy, The Post has learned.
Sure, Trump likes to tout JPMorgan super-banker CEO Jamie Dimon as a possible Treasury secretary…but it’s really Fink whom he likes, respects and speaks with, I am told….
Fink is much more of a political moderate than the ESG-tainted image pushed by his critics on the right.
He and BlackRock have backed off ESG these days, deploying it mostly for clients (blue-state pension funds and sovereign-wealth funds) that ask for it.
He’s been meeting with GOP leaders on the Hill, in state government, and is no pal of super lefties like Massachusetts Sen. Elizabeth Warren, because BlackRock, for all its ESG talk, was and is one of the largest institutional investors in energy companies.
I…just…I…don’t…you see…it’s…it’s not really…oh, for crying out loud.
To begin with, the relationship between Fink and Trump is not exactly a secret. It is, in fact, the opposite. It is common knowledge. Moreover, it’s common knowledge that has already yielded real-life outcomes. From the introduction to my book The Dictatorship of Woke Capital:
On March 24, 2020, the United States government, which Lincoln famously called “the last, best hope of Earth,” officially launched a “partnership” with BlackRock, Inc., the world’s largest money management firm. With the economy suddenly in shambles, crushed under the weight of the global coronavirus pandemic and associated “social distancing” measures, the Federal Reserve desperately needed help navigating uncharted territory and administering and managing its brand-new corporate bond programs. And in its hour of need, the Jerome Powell–led Fed turned to Larry Fink and BlackRock.
It was an interesting, if unsurprising, choice for the Fed. With more than $7 trillion in assets at the time, BlackRock was already the undisputed king of the financial services world. More to the point, over the several previous months, it had also become one of the world’s largest and most powerful advocates of what Fink called “a fundamental reshaping of finance.” If anyone could help the Fed and help the nation, then it would seem that Larry Fink was the man.
The interesting thing is that Fink made his declaration on “reshaping” finance several weeks before he was tapped by the Fed and before he met with President Donald Trump, who later called him one of “the smartest people” we, the nation, have working to fix all our problems. Even before the coronavirus cratered the stock market and the American economy, Fink was already busy finding ways to fix that which he saw as broken, which included a great deal more than the fallout from a mere virus. Fink planned to “reshape” finance not just to save the country, but to save the world as well.
Trump likes Fink. Always has, probably always will.
And you know what? That’s fine. In fact, it’s great. The whole point of the movement pushing back against ESG is to “depoliticize” financial and investment decisions. If the “populist” Trump and the “globalist” Fink can be pals and can respect each other’s financial acumen, then more power to them. That’s what we want, for people of differing political outlooks to treat one another as friends and equals, partners who share a great deal in common, ideology notwithstanding.
Therein lies the rub, however. No matter how hard Gasparino may try to minimize the incongruities between Trump’s worldview and Fink’s, they are fundamentally incompatible, in large part because Trump purports to support the “depoliticization” of finance and markets, while Fink was one of the primary forces driving their politicization and remains so today. Gasparino dismisses BlackRock’s ongoing ESG activity, declaring that Fink and his firm “have backed off ESG these days, deploying it mostly for clients (blue-state pension funds and sovereign-wealth funds) that ask for it.” This statement is largely incompatible with reality: BlackRock is not only the largest ESG manager on the planet (by AUM) but continues to increase its dominance, to use its size to succeed where others continually fail. As noted in these pages last week, Fink and BlackRock continue to push ahead with an agenda that is overtly politicized and, by extension, is purposefully designed to achieve ends that are “social” and “environmental,” rather than purely financial. Fink himself specifically and aggressively touts “sustainability” as a key marker in financial decisions, which belies the pretension that he has “changed” or “backed off” anything in the last few years. Again, from the introduction of The Dictatorship of Woke Capital:
Larry Fink is a born-again “fundamentalist.” He’s not a fundamentalist in the sense that market observers and participants might expect, i.e., someone with a deep and abiding dedication to market fundamentals or company fundamentals. Rather, Larry Fink is a religious fanatic, a believer in search of the pure, fundamental practice of his faith. Or, at the very least, by the start of 2020 he had decided to play one on TV. Fink had been building to a public profession of his faith for several years, and in late January, even as COVID-19 was already ravaging Wuhan, China, he made it official in a letter to clients of his firm (and a concurrent letter to CEOs). “We believe,” Fink professed, “that sustainability should be our new standard for investing.”
That was near the apex of the ESG movement, and, in many ways, nothing has changed.
Finally, Gasparino tells his readers not to worry about all the highfalutin talk about climate change and sustainability, given that BlackRock “was and is one of the largest institutional investors in energy companies.”
One presumes that Gasparino knows better, but just in case, I’ll repeat it for the kabillionth time: ESG is NOT a de-capitalization strategy. It is an engagement strategy. And in order to engage with companies, one must be a shareholder. Traditional Socially Responsible Investing was a de-capitalization/divestment strategy. ESG is different, specifically because it is coercive. It only works if those trying to make social and environmental changes have leverage over corporate leaders. And that leverage comes in the form of being a corporate shareholder – in BlackRock’s case, quite often, the LARGEST corporate shareholder. Of course, BlackRock “is one of the largest institutional investors in energy companies.” I mean…that’s how ESG works, not to mention how exchange-traded funds work. The pretense that BlackRock’s ownership of energy companies is somehow relevant is risible – or it would be if it weren’t so condescending.
The bottom line here is that Larry Fink is, inarguably, one of the most important players in global financial markets. Indeed, he may be the most important player. People whose personal and professional well-being depend on remaining in good standing with the important players in global financial markets are, therefore, apt to want to accommodate him. And they’re apt, in turn, to minimize his negative attributes while maximizing the positive. That’s true of Charles Gasparino, but it’s also true of Donald Trump.
The only way to counteract such self-interest-driven misconceptions and mischaracterizations is to correct the record whenever possible.
The truth, as they say, will out. Eventually.
