Larry Fink defends BlackRock’s energy bet days after Texas riot

BlackRock (BLK) CEO Larry Fink days after the giant Texas retirement system withdrew $8.5 billion from its money management company for allegedly being involved in a “boycott” of the fossil fuel industry. , reiterated its commitment to investing in oil and gas companies.

BlackRock said in its annual shareholder letter released Tuesday that Fink has “never supported exiting traditional energy companies” and currently invests more than $300 billion in such companies. are investing.

“The reason we invest in these energy companies is simple: it’s our customers’ money,” Fink said. “If they want to invest in hydrocarbons, we give them every opportunity to do it.”

BlackRock’s defense of energy investments echoes comments made by Mr. Fink in recent years, but last week a Texas endowment that manages public school funds in the state announced that $8.5 billion of the $8.5 billion that BlackRock had managed It also followed the surprising decision to withdraw.

The reason was to comply with a 2021 Texas law that prohibits investments in companies that “boycott energy companies,” according to a statement from the president of the Texas State Board of Education.

The official, Aaron Kinsey, also said that BlackRock’s “dominant and persistent leadership in the ESG movement is causing untold damage to the state’s oil and gas economy.”

Although Mr. Fink did not directly address the issue in his letter and it is unlikely to cause a major financial blow to his company, which manages about $10 trillion, Mr. He advocated a more nuanced view of how it is used.

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“Energy markets are not as fragmented as some people think, and are sharply divided between oil and gas producers and new clean power and climate change technology companies,” he said. Ta. “Many companies, like Occidental, do both, and this is the main reason BlackRock has never supported divestitures from traditional energy companies.”

He also cited Texas’ energy crisis, which suffered a major power crisis in February 2021, and said it will not go away.

He wrote that unless Texas continues to consider different energy sources, such as natural gas, “the state could continue to experience catastrophic power outages,” and that Texas currently uses 28% of its energy from renewable sources. He pointed out that this is higher than the United States as a whole.

Fink believes that energy and energy infrastructure as a whole will be the “biggest demand for new investment” in the coming years. Earlier this year, the CEO led a $12.5 billion deal to acquire private equity firm Global Infrastructure Partners to increase the company’s focus.

Tuesday’s annual letter also focused on retirement issues. He outlined the coming retirement crisis caused by people living longer and the government’s safety net fraying. He says the scale is similar to the 2008 mortgage crisis and other milestones in recent economic history.

In his letter, Fink distanced himself from any direct involvement in 2024 politics. President Joe Biden’s name appeared only once. It briefly mentioned the president’s infrastructure law as part of an argument about the need for increased private investment. Donald Trump, the likely Republican candidate, never showed up.

Also absent was the politically controversial acronym ESG, which stands for investing based on environmental, social and governance principles. Mr Fink claimed last year that words had been “weaponized” and he vowed not to utter them.

Energy is becoming increasingly controversial in the US

But even without ESG, climate change and the world’s array of energy issues were the focus of much of Fink’s Tuesday letter.

The comments come after Fink announced earlier this year that he and conservative states such as Texas have been wary of him since he has long been seen as the face of the ESG movement. It was announced after they tried to come up with some sort of ceasefire.

There was some early success. Fink met with Texas Lieutenant Governor Dan Patrick earlier this year about efforts to strengthen the state’s energy grid. The conservative politician was particularly good-natured, reportedly calling Mr. Fink the “King of Wall Street” and saying they hit it off.

But it remains to be seen whether this cordial relationship can overcome larger political divisions. Texas’ decision to remove BlackRock from state school funding appears to have been led by Kinsey, chairman of the Texas Board of Education.

Mr. Fink said in his letter that leaders around the world are calling for Mr. Fink’s massive private financing to be used for energy projects, much like the uncertain future of an energy project in Texas.

“The issue is more contentious in the United States, but outside of that debate, a lot of things remain the same,” he said, noting that decarbonization investment continues to flow heavily, especially in Europe and elsewhere. He pointed out that

Equal focus on the retirement “crisis”

Mr. Fink also devoted considerable space to the issue of retirement in his annual letter.

“No one should have to work longer than they would like. But it’s a little strange that our basic ideas about a suitable retirement age of 65 originate from the Ottoman era. I think it’s crazy,” the 71-year-old CEO wrote.

He proposed a series of changes to various “pillars” of retirement security, from encouraging people to save more personally to transforming government at both the state and federal level.

Underlying the growing need, he wrote, is the good news that people are becoming healthier, thanks in part to new obesity-fighting drugs such as Ozempic and Wigovy.

“As a society, we put a lot of energy into helping people live longer, but only a small portion of that effort goes toward helping people afford those extra years. ” he wrote, announcing that the company was launching new partnerships and initiatives. We will be working on different aspects of this issue over the coming months.

Regarding Social Security, Mr. Fink said that with the Democratic Party leaning toward tax increases and the Republican Party floating the idea of ​​cutting benefits in the face of bankruptcy in about 10 years, the issue of what to do about the Social Security system in the 2024 election campaign has increased. I didn’t go deep into what was going on.

But Mr. Fink took the time to encourage U.S. states to become “retirement institutes” and come up with more plans for their citizens.

He said tackling a system that is “under immense strain” will require a massive effort in the coming years from business leaders and all levels of government.

Ben Werschkul is Yahoo Finance’s Washington correspondent.

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