Larry Fink has been vouching for environmental, social and governance goals to be adopted by American business’s modus operandi
Larry Fink, the chief executive officer of the world’s largest asset manager, BlackRock Inc., has announced the appointment of Amin Hassan Nasser, the President and CEO of the world’s largest oil company, Saudi Aramco, to its board. Fink was criticised by investors, government, environmentalists, etc.
Since 2008, BlackRock has given a seat to members from the oil-rich Gulf countries. Fink has got the sovereign investment funds of Saudi Arabia, Abu Dhabi, Kuwait and Qatar, which are loaded with huge oil money to invest and become active shareholders of BlackRock. They have made partnership deals in several of BlackRock’s private investments that happen to generate more profits than its conventional business of ETFs.
Fink is not new to Gulf investments. The appointment of Nasser is the pivotal turn for strengthening ties, especially at a time when Saudi Arabia is impatiently looking for investment opportunities to diversify itself from oil.
BlackRock established its business by offering low-cost index funds. It is similar to its other counterparts, like Vanguard and Fidelity. The visionary Larry Fink diversified into other businesses as well, which its peers didn’t. The asset management company now has better profitable business built-in advisory services, risk management, infrastructure, and alternative assets.
Concerns regarding E.S.G.
Larry Fink has been vouching for environmental, social and governance goals to be adopted by American business’s modus operandi. The latest appointment of the Saudi oil giant head to the board attracted criticism due to the promotion of E.S.G. It was called out as a display of sheer hypocrisy.
Fink has been caught up in a chain of problems recently. His campaigning for the E.S.G. reforms have been accused of woke capitalism by right-wingers. At the same time, the left-wing is concerned with his healthy relations with the energy companies.
The New York City comptroller, Brad Lander, said that in the current world where financial behemoths should come in collaboration to tackle the financial issues of climate change, BlackRock’s shareholders deserve a climate-compliant instead of a climate-conflicting director. Lander, who has approximately $250 billion under management in New York City’s pension fund, is absolutely irritated by the appointment of Nasser.
Fink began the promotion of E.S.G. just a few years ago. He mentioned in his 2020 annual letter to chief executives that his 35-year-old co-founded company would take up sustainability as the centre of their investment approach. He wrote in bold that every government, business and shareholder must tackle climate change.
Recently, Fink got caught up in questioning and had to conserve, in simpler terms, hold back on his view about E.S.G. Even White House politicians mocked BlackRock’s stance as activist investing. In retaliation, several pension funds were divested from the company, potentially withdrawing billions of dollars.
Relations with Saudi Arabia
BlackRock has $9 trillion under asset management, and this gigantic size makes it difficult to grow and keep investors happy. BlackRock has proclaimed a higher valuation from its peers, citing that it had better investment opportunities.
Saudi Arabia’s Public Investment Fund happens to be a pool of $700-plus billion, making it the world’s largest sovereign wealth fund. They have recently started investing overseas in different industries. This is expected to have attracted Fink, as it is the biggest unutilised fund in the world.
Saudi has also added large-scale domestic infrastructure projects to its portfolio. This includes building the famous NEOM city. BlackRock is an investor and advisor in that project as well as some others.
BlackRock commented that the appointment of Nasser has made Aramco the global leader in energy transition. Ironically, Aramco has announced that it will increase its production of oil and gas in the near future. At the recently held 2022 United Nations global climate summit in Egypt, they took a backseat to their efforts to reduce the usage of oil.
Fink has shifted his stance on environmental and social concerns and has been enthusiastic in his interest and support towards the Saudi Kingdom. He makes frequent visits to the kingdom, almost two or three times a year. Back in mid-2018, he hosted an event at his summer palace in Jeddah alongside Crown Prince Mohammed bin Salman. He had invited near about 150 global heads of state and major financial institutions.
BlackRock emerged as the largest subscriber of the $12 billion debt deal that Aramco put forth in its debut in the international markets back in April 2019.
In early 2020, PNC Financial Services, BlackRock’s largest shareholder, wanted to divest its 22% stake. Fink talked with the CEO, William Demchank, that he would like to choose the investors. Fink immediately called the heads of many Middle Eastern sovereign wealth funds, including Saudi Arabia’s Public Investment Fund and sealed a deal for a $13 billion stock sale.
