March 2023

by Hank Boerner – Chair & Chief Strategist, G&A Institute 

As the interest in ESG continues to rise in the capital markets and corporate community, in recent years the business and financial media have focused attention on the annual letter that CEOs of many publicly-traded companies receive from Larry Fink, Chair and CEO of BlackRock.  

The annual letters (one for corporate CEOs and one for BlackRock investors) has set out important themes for both corporate and capital market leaders to consider (including fiduciaries entrusting their assets to BlackRock to manage).   

The annual letter to corporate CEOs is described as “on behalf of our clients” – BlackRock’s fiduciary/clients. 

This year, BlackRock published one letter – for the firm’s investors, to be shared with stakeholders. 

In these much-anticipated annual missives, Founder/Chair/CEO Fink outlines what the world’s largest management firm has in mind as his organization helps to manage billions’ of dollars of portfolio investments for institutional clients. 

Explains Mr. Fink: “I write these letters as fiduciary for our clients who entrust us to manage their assets – to highlight the themes that I believe are vital to driving durable long-term returns and to helping them reach their goals.”

The recent annual letters have contained important information for both corporate leaders and the investment community. BlackRock is the world’s largest asset management team, with US$10 trillion in assets under management, 20,000 employees, offices around the world, and clients in 100-plus countries.

BlackRock clearly self-identifies as an asset management firm serving fiduciaries with strong ESG in focus, striving to be the leader of ESG investment in the capital markets.

In advertising in the United States of America, and on its corporate web site, BlackRock points out that it “helps 44 million Americans retire with dignity”. (This is through the management of assets in employee retirement programs.)

There’s good reason for that point of emphasis: In the U.S., a growing number of Republican political leaders have been criticizing asset managers BlackRock, State Street, and Vanguard as “woke” organizations, claiming that BlackRock caused such clients as public employee retirement funds to not achieve the best ROI by using the ESG lens.  (The opposite is true, BlackRock CEO Fink pointed out at the recent Davos gathering).

In recent years the closely-followed “Chairman/CEO-to-CEO” letters from BlackRock’s leader have focused on these themes:

2022: “The Power of Capitalism”
2021: “A Tectonic Shift Accelerates”
2020: “The Fundamental Reshaping of Finance”
2019: “Purpose and Profit” (this followed The Business Roundtable re-stating its mission to focus on “purpose” of the member corporations).

In 2023, the focus of the investor letter is on the positive aspects of sustainable investing — with the theme, “Making Investing More Accessible, Affordable, and Transparent to More People is Core to Our Mission at BlackRock.”

The reason? “As we start 2023,” Larry Fink writes, “it is clear to me that all of our stakeholders – BlackRock shareholders, clients, employees, partners, the communities where we operate, and the companies in which our clients are invested – are facing so many of the same issues. For that reason I am writing a single letter to investors, and we are sharing it with all of our stakeholders.”
Included in the 2023 letter: The BlackRock Story. Total returns since the company’s IPO In October 1999. An economy of fragmentation (describing important changes taking place in recent years). Building a hopeful future for retirees. Investing for the future as act of hope and optimism. Strategy for long-term growth. Helping clients navigate and invest in the global energy transition.

That last theme is at the root of some Red state leaders attacking the firms – oil & gas and coal companies are key constituencies.

Despite organized Republican opposition to BlackRock’s embrace of ESG factors in investment decision making, consider this is the BlackRock letter to its investors:

“BlackRock captured a leading share of long-term industry flows in 2022 and delivered a positive organic base fee growth for the year.

Over the past five years, BlackRock delivered an aggregate $1.8 trillion in total net inflows, or average 5% average organic asset growth, compared with flat or negative industry flows.”

Consider the “why” of Larry Fink’s letters:  “Part of supporting our clients includes speaking out on issues that are important to their investments. I’ve long believed that it is critical for CEO’s to use their voice in the world – and there’s never been a more crucial moment for me to use mine. I will do so whenever and wherever I believe it can serve the interests of our clients and the firm.”

We’ve included the link to the Annual Letter to Investor for your reading and a link to the Harvard Law School Forum on Corporate Governance (the Annual Letter is posted there in different format). This year’s letter is worth reading as we contemplate the effects of the Red state attacks on ESG and “woke” asset managers.

For your reference:

Larry Fink’s Annual Chairman’s Letter to Investors (Source: Black Rock):    https://www.blackrock.com/corporate/investor-relations/larry-fink-annual-chairmans-letter

Harvard Law School Forum on Corporate Governance review of the letter:

https://corpgov.law.harvard.edu/2023/03/17/larry-finks-annual-chairmans-letter-to-investors/