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Larry Fink's job is safe, but BlackRock's image is not

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Dec 7, 2022

Larry Fink speaking at the Dealbook event earlier this month. Photo: Thos Robinson/Getty Images for The New York Times

Activist hedge fund Bluebell Capital Partners sent a letter to BlackRock’s board on Nov. 10 that accused BlackRock of being inconsistent in its practices, demanding a review of its ESG stance, and calling for CEO Larry Fink to step down.

Why it matters: The campaign will pour gas on the conflict-of-interest fire that has simmered under the asset manager for a while now, and it will be more than an annoyance.

Reality check: Bluebell wants Fink fired, but with a stake worth 0.01% and a fund of only a few hundred million dollars, they don't have the votes or the power.

  • The focus on Fink as a CEO is a distraction. Over several decades, he has built BlackRock into the world's biggest asset manager, and created huge amounts of value for shareholders.
  • Plus, to unseat a CEO this way, you need support from big shareholders, and looking at BlackRock's top holders, they're as institutional as they get, and they're probably not complaining given the inflows and share price gains.

Yes, but: BlackRock does promote ESG principles, and certain funds invest in fossil fuels. Therein lies the rub.

Context: Small activists have driven big changes before. Bluebell drove a campaign for change against France's dairy giant Danone and, in the end, the CEO stepped down.

  • But Danone's CEO was already under fire, and he hadn't driven nearly the amount of value that Fink has as BlackRock's leader.

Zoom in: Fink's job security aside, he is in a pickle.

  • The simple fact is that while Fink has for years held up climate change as a top priority, and said over and over that "climate risk is investment risk," his company’s funds continue to have exposure to fossil fuel companies.
  • And as Bluebell points out, BlackRock has spurned certain pro-ESG campaigns that the hedge fund has led, feeding further its thesis that the asset manager speaks out of both sides of its mouth.

The bottom line: Conservative politicians have been after Fink and BlackRock for at least a year now, calling his brand "woke capitalism" and saying it goes against investor interest.

  • Now BlackRock has an activist coming at it from the left side but pointing to conflicts of pushing an ESG friendly investment plan while holding shares in big oil.
  • BlackRock stands by its fiduciary duty.

👀 What we're watching: Like so many activist campaigns, no matter how big the hedge fund, Fink and BlackRock will be engaged in a PR war.

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