BlackRock (BLK) CEO Larry Fink has spent years reminding investors that they should consider responsible environmental, social, and governance practices when evaluating companies.
But he now refuses to use the word "ESG" any longer, saying "it's been misused by the far left and the far right."
"I'm not blaming one side or the other, but it has been totally weaponized," Fink said Sunday at the Aspen Ideas Festival, according to media reports.
The new pledge from the boss of the world’s largest money manager captures the intensity of the current debate around the subject of ESG investing.
Fink has become a corporate face of that trend over the last decade thanks to years of annual letters to investors that urged companies and long-term investors to do more to prepare for climate change.
"Climate risk is investing risk," he said in one of these letters. ESG issues ranging from climate change to diversity to board effectiveness "have real and quantifiable financial impacts," he said in another. Fink asked companies in 2021 "to disclose a plan for how their business model will be compatible with a net-zero economy."
These comments earned him critics from both sides of the ideological spectrum. Some on the right accused him of "woke capitalism" and undermining the oil and gas industry. Some on the left said Fink's own firm didn’t go far enough to reduce its own exposure to climate issues by divesting from oil and gas investments.
BlackRock became the target of public protests as well as high-profile efforts by state officials, including Florida Governor Ron DeSantis, to pull public pension money from BlackRock. Florida withdrew $2 billion from the firm as punishment for its ESG stance.
'The pendulum swung too far'
Fink’s frustration with the blowback was apparent last weekend during a conversation at the Aspen Ideas Festival.
His annual letters, he said, were “never meant to be a political statement. They were written to identify long-term issues to our long-term investors.”
In his last CEO letter released earlier this year, he said, "The phrase ESG was not uttered once, because it's been unfortunately politicized and weaponized."
It wasn't the first time he has discussed his view that the phrase has been weaponized; he made that same point to an Australian publication earlier in the month.
One anti-ESG advocate in Washington responded to Fink’s comments with relish. Rep. Andy Barr (R-Ky.) told Yahoo Finance in an interview that he sees the new remarks as a win for his effort to stop the ESG trend in its tracks.
"The pendulum swung too far," he said Tuesday, arguing that asset managers have been too responsive to pressure from the left in recent years.
"They didn't know that there would be a counterweight and I think they've learned that."
The Kentucky lawmaker also lauded a recent move by Vanguard, another giant money manager, to withdraw from a climate-focused consortium called the Net Zero Asset Managers initiative.
The move, Barr says, shows the asset manager has also "seen the light" and that the overall Republican effort is working.
The political pressure from Washington is likely to only increase in the weeks to come.
Barr and other House Republicans have promised that once lawmakers return to Washington after the independence day recess, July will be dubbed "ESG month." That means a variety of bills and public hearings around the issue.
Fink’s frustrations are surfacing amid a wider pushback this year against shareholder proposals that demand action on a variety of ESG issues ranging from corporate diversity to carbon emissions.
Conservative-leaning shareholders have pushed a record number of anti-ESG proposals during recent proxy seasons, a time in the spring and summer when shareholders seek votes on specific proposals.
The number of anti-ESG resolutions on corporate ballots between January 1 through May 31 rose by more than 400% from 2020 to 2023, according to ISS Corporate Solutions, a Rockville, Md.-based provider of ESG data and analytics to corporations.
That helped drive the volume of shareholder proposals up by 14 percent during that period.
Investors are also making it clear they are not in favor of certain pro-ESG measures that did make it to the ballot this year.
This spring, for example, investors rejected a series of shareholder proposals requiring American companies to disclose more about the risks they face now that women no longer have the constitutional right to an abortion.
All 16 proposals that went to a vote at annual meetings failed. Fourteen others were withdrawn, and in some cases, proponents revoked proposals after companies agreed to more transparency or broader consumer protections.
One proposal asking Mastercard (MA) to disclose the risks of handling law enforcement requests for abortion-related customer data is scheduled for a vote today.