Larry Fink, CEO of BlackRock, has published his 2022 annual letter to CEOs, which outlines his view that the road to decarbonisation is built on the foundations of traditional fossil fuel companies’ global infrastructure. Fink believes that fossil fuels and natural gases are the “bridge” between our current fossil fuel industry and a decarbonised economy. This manifests in BlackRock’s portfolio, as its investment strategy still features fossil fuels and fracking. Climate activists have been disagreeing with Fink, as they believe that he is not going far enough in his willingness to transition away from oil and gas industries. Moira Birss, Climate and Finance Director at Amazon Watch, goes so far as to say that, “Fink apparently wants to be above the political fray, by playing nice with those profiting off of the causes of climate change.”
What activists would have likely been comforted by, would have been a more explicit reiteration of his 2021 sentiment: that vulnerable communities and developing nations need sufficient support to ensure they do not suffer the “economic shocks of a poorly implemented transition”. This year Fink highlighted that “the transition to net zero is already uneven with different parts of the global economy moving at different speeds… we need to pass through shades of brown to shades of green.” Fink rightly points out that the world is not currently moving at the same speed, and without conscious decisions, many will be left behind. The premise of a just transition, is that everyone benefits and moves towards a green world without being left behind. A just transition needs to move at a pace that suits everyone, and those currently working in the fossil fuel industry, need to be supported in a move away from dirty fuels; those who rely on fossil fuels, need to be helped in the transition to different types of fuel.
This is where governments should play a critical role, Fink argued. “Businesses can’t do this alone, and they cannot be the climate police.” Governments do need to step up, and provide frameworks and incentives to move away from fossil fuels and enforce disclosures on these industries in a way that ensures no-one suffers. However, Fink could be more proactive in supporting the just transition that he calls for. The Just Transition Fund, set up by the EU last year, pledged €17.5 billion to help the most coal-dependent European Union regions shift to a climate-neutral economy. The fund was set up with a just transition in mind as “citizens don’t want new mines… neither do they want to choose between climate protection and jobs.” What climate activists likely want to see, is a similarly dynamic approach to be adopted by BlackRock. Rather than falling short, by highlighting the role of fossil fuels in the move to a green economy, Fink may have come under less criticism had he instead been more focused on capital allocation that supports a just transition.