3/3/2025
BlackRock’s ‘Woke’ Era Is Over
Wall Street Journal (03/03/25) Pitcher, Jack
When BlackRock (BLK) joined a U.N.-sponsored climate coalition in March 2021, sustainability groups were thrilled. Having the world’s largest investment firm on board instantly lent credibility to the Net Zero Asset Managers, an initiative committed to support the goal of net-zero greenhouse gas emissions by 2050. Dozens of major investment managers followed BlackRock’s lead. “BlackRock is proud to put its name behind this initiative,” Chief Executive Larry Fink said at the time. Nearly four years later, Fink was distancing himself. NZAM got a phone call on Jan. 9: BlackRock was out. Within days, the coalition was teetering. BlackRock’s departure from the coalition and its reversal this week on several diversity, equity and inclusion policies are the latest examples of the company’s retreat from advocating for issues related to environmental, social and corporate-governance factors. It has been gradually walking back its ESG initiatives for years after conservatives criticized the movement as being “woke” and legal risks grew. BlackRock’s recent actions show the reversal is almost complete, though the fallout might not be. The company has been able to maintain strong results throughout the controversy, reporting record inflows last year. Crucially, BlackRock has remained out of the crosshairs of President Trump, who has a personal relationship with Fink. Trump has publicly commended Fink for managing his money well in the past, and Fink and other BlackRock executives still have the Trump team’s ear on economic issues, according to people familiar with the matter. Fink, one of the loudest voices on Wall Street, had spoken out about the risks of climate change for the better part of a decade. Few think he was being disingenuous when he warned that “climate risk is investment risk” in 2020. But his $11.6 trillion firm, which was eager to discuss how it could lead on environmental and social issues just a few years ago, has largely abandoned such rhetoric after a series of congressional inquiries and red-state lawsuits. “This is hardball politics at its best, or worst, however you want to think about it,” said Mindy Lubber, CEO of sustainability nonprofit Ceres and one of the leaders of NZAM. The campaign against ESG began in earnest in 2022, with coordinated efforts backed by oil-and-gas lobbyists and Leonard Leo, a longtime leader of the Federalist Society. Anti-ESG groups made BlackRock, and Fink, the poster child for what they call “woke capitalism.” “This woke capitalism thing, two years ago, nobody had heard the term,” said Lubber. “I still can’t really tell you what it means, but it’s been very effective. One would be foolish not to say that.” Red states have passed dozens of anti-ESG laws. More than a dozen state attorneys general have targeted BlackRock over its ESG practices, and the Republican-led House of Representatives has subjected large asset managers to hearings and subpoenas. BlackRock’s recent withdrawal from the climate coalition came one day before a deadline for it to respond to the latest House probe. It demanded information from more than 60 U.S.-based asset managers regarding their involvement in NZAM, which the House Judiciary Committee calls a “woke ESG cartel.” BlackRock, and many legal observers, say the claims on which the state laws and lawsuits are centered are baseless. The company settled an ESG suit with the state of Tennessee in January without admitting wrongdoing or paying any money. Regardless of the claims’ merit, the anti-ESG movement has won major concessions as BlackRock works to distance itself from controversy. Its membership in climate groups was often cited as evidence in state lawsuits. The company’s PR efforts and public statements have changed markedly as well. Executives now rarely mention ESG issues, a favorite talking point just a few years ago. Recent communications have focused on BlackRock’s role as the largest steward of Americans’ retirement assets and how it can play a role in helping people save and spend their nest eggs. BlackRock’s ESG fund launches have ground to a halt. It hasn’t launched an ESG exchange-traded fund in the U.S. since the first quarter of 2024, after launching 30 over the previous five years, according to Morningstar. The company took further steps to distance it from the movement last week, removing all mentions of DEI—which was previously declared a corporate priority—from its latest annual report. On Friday, BlackRock told employees it was ending aspirational workforce representation goals and would no longer require managers to interview a diverse slate of candidates for open positions, according to an internal memo viewed by The Wall Street Journal. “Significant changes to the U.S. legal and policy environment” related to DEI prompted the changes, the memo said. Meanwhile, BlackRock disclosed that it had renegotiated and removed sustainability-linked pricing metrics from a $4.4 billion credit facility it struck in 2021. It ended provisions that linked lending costs to whether it met targets for women in senior leadership and Black and Latino employees in the workforce. The credit facility had been oft-mentioned by political enemies accusing the asset manager of being woke. When it comes to proxy voting on behalf of its fund investors, BlackRock supported 4% of environmental and social shareholder resolutions in 2024, down from 40% in 2021, according to responsible investment charity ShareAction. BlackRock’s business just posted a banner year, and executives appear to have concluded that sticking the company’s neck out on controversy isn’t worth it. “ESG was conflated with being woke,” said Michael Littenberg, global head of the ESG practice at law firm Ropes & Gray. “Many managers have gotten smarter about addressing the backlash.”
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