Title: BlackRock Faces Backlash Over Appointment of Aramco Executive to Board
Introduction:
Larry Fink, the CEO of BlackRock, has long advocated for environmental, social, and governance (ESG) goals to be integral to corporate practices. However, the recent appointment of Amin Nasser, the head of Saudi Arabia’s state-owned oil company Aramco, has drawn criticism from investors and politicians who accuse Fink of hypocrisy. This move highlights the challenges Fink faces in reconciling his ESG commitments with his pursuit of new sources of funding for BlackRock’s growth.
Expanding Ties with Oil Companies:
Fink has a history of courting oil money from the Middle East, with Nasser’s appointment marking a significant effort to deepen these ties. BlackRock has had board members from Middle Eastern countries since 2008 and has encouraged sovereign wealth funds from Saudi Arabia, Abu Dhabi, Kuwait, and Qatar to become shareholders. Additionally, BlackRock has partnered with these funds for private investments, which tend to be more profitable than their traditional business of exchange-traded funds.
Controversial Appointment Sparks Criticism:
The decision to add Nasser to BlackRock’s board has sparked backlash from investors and politicians. Giuseppe Bivona, the chief investment officer of hedge fund Bluebell Capital, criticized Fink for going against BlackRock’s green economy messaging. New York City Comptroller Brad Lander expressed concern about climate-conflicted directors in a statement, reflecting the expectation that financial institutions address the financial risks of climate change.
Fink’s Stance on ESG under Fire:
Fink’s championing of ESG principles has drawn criticism from both the right and the left. Senior Republican leaders have accused BlackRock of activist investing, while climate activists regularly protest outside its headquarters. In response to political blowback, Fink has de-emphasized his stance on ESG, and BlackRock has highlighted its clients’ investments in the energy industry.
BlackRock’s Growth Challenges:
BlackRock’s size poses challenges for its growth and the attraction of new assets. While it primarily offers low-cost index funds, Fink has pushed the asset manager to invest in more profitable areas such as advisory work, risk management, infrastructure, and alternative assets. The Middle East, specifically Saudi Arabia, is considered crucial to BlackRock’s future, and Fink has actively sought investments from Saudi Arabia’s sovereign wealth fund.
Conclusion:
The appointment of Amin Nasser to BlackRock’s board has intensified the criticism faced by CEO Larry Fink. While the move is seen as an effort to deepen ties with oil companies and secure funding for BlackRock’s growth, it appears contradictory to BlackRock’s commitment to ESG goals. Fink’s ability to navigate these conflicting interests will determine the future success of BlackRock in an increasingly ESG-focused investment landscape.
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