Some of the biggest business targets in the next Republican-controlled U.S. House will be firms that have made fighting climate change a priority.
Larry Fink, CEO of the world’s largest money manager BlackRock, will likely be called to testify before the U.S. House Financial Services Committee, according to people familiar with the matter. It would be the first public hearing in Congress featuring Fink, whose firm manages $8 trillion in assets.
This week, Republican staff of the Senate Banking Committee released a report slamming BlackRock, State Street and Vanguard for using their power in corporate shareholder votes to advance “liberal social goals known as ESG (environmental, social, and corporate governance) and DEI (diversity, equity, and inclusion).”
BlackRock said the report was based on “flawed premises” and its recommendations would raise costs for investors.
In a possible sign of the pressure, Vanguard on Wednesday backed out of Net Zero Asset Managers, a group tackling climate change, saying involvement in such initiatives could create “confusion about the views of individual firms.” It represents around $66 trillion in assets.
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The Washington scrutiny will have more of an impact on Fink’s career than BlackRock’s emphasis on fighting climate change. Its business is in solid shape, despite the market downturn, so there’s no pressing reason to reverse course. And a Democrat in the White House means any Republican legislative moves to curb its operations won’t go too far.
This means companies that count BlackRock as a big shareholder, which is basically every major corporation from Apple to Boeing, can expect to keep hearing about sustainability and climate risks.
Still, Congress can at least be an annoyance, especially for Fink, and how he does in a possible hearing will determine how much of a pest lawmakers will be. BlackRock has already been put on investment blacklists in several states, including Texas.
Executives' preparation can matter deeply. Former Wells Fargo CEO John Stumpf was ill prepared and tone deaf when he came before the Senate in September 2016 amid a fake accounts scandal. He stepped down from the bank a month later.
Meta Platforms chief Mark Zuckerberg, by contrast, has appeared repeatedly before Congress, and has largely avoided getting pinned down, in part because many lawmakers don’t understand Facebook’s business model and technology.
That could be an advantage for Fink as well. BlackRock has a massive, global business and invests in stocks, bonds, real estate and more. It’s a complex business, and also a bit of a boring one.
But Fink has been an outspoken proponent of equating climate change to financial risks for companies and his words could be used against him. As someone who has never been grilled by lawmakers in public, his ability to avoid looking and speaking like he isn’t annoyed or frustrated is untested.
Room for Disagreement
Perhaps more than BlackRock, House Republicans have the Securities and Exchange Commission in its sights. Presumptive Financial Services Chairman Patrick McHenry is among his party’s members who have blasted the SEC for overstepping its authority in proposing rules, including one on requiring certain climate disclosures.
- Congress isn’t the only one scrutinizing BlackRock. Activist investor Bluebell Capital Partners has accused the asset manager of failing to live up to its climate commitments and called on Fink to resign.