BlackRock, Inc. is a behemoth in the world of investment management. With over $9 trillion in assets under management, it is the largest investment firm on the planet.
Its assets under management are larger than the annual revenue of every company in the Fortune 500, combined. It’s also larger than the GDP of Japan, the third-largest economy in the world.
To put it into perspective, the U.S. Government collects $4.9 trillion in taxes every year, meaning BlackRock is nearly twice as large as what the federal government collects each year. But what exactly does BlackRock do, and why is its size so significant?
Founded in 1988, BlackRock is a New York-based investment management company that provides a wide range of financial services to institutional and individual investors. Its clients include pension funds, endowments, foundations, central banks, insurance companies, and governments, among others. BlackRock offers investment solutions across different asset classes, including equities, fixed income, alternatives, and cash management. The company’s stated mission is to help clients achieve their investment goals, while also delivering positive social and environmental outcomes.
One of the key trends in the investment industry in recent years has been the rise of environmental, social, and governance (ESG) investing. ESG investing refers to the practice of considering a company’s environmental, social, and governance factors in the investment decision-making process. The goal is to identify companies that are not only financially attractive but also socially responsible and environmentally sustainable.
BlackRock has been at the forefront of the ESG investing movement. In January 2020, the company announced that it would make sustainability its new standard for investing, and that it would start divesting from fossil fuel companies and other environmentally harmful investments. BlackRock has also been committed to using its voting power as a shareholder to push companies to disclose their ESG risks and opportunities.
With great power comes great responsibility, and BlackRock’s embrace of ESG investing has raised some serious concerns. On the surface, ESG investing seems like a positive development.
The practice of considering a company’s environmental, social, and governance factors in the investment decision-making process is aimed at identifying companies that are not only financially attractive but also socially responsible and environmentally sustainable. However, there are several reasons to be skeptical of BlackRock’s approach to ESG investing.
One major issue is the question of whether ESG investing is actually effective in driving positive change. While there is some evidence that companies with better ESG scores tend to perform better financially over the long term, it’s not clear that ESG investing as a whole is having a significant impact on the world’s most pressing environmental and social problems. Critics argue that ESG investing is more of a marketing gimmick than a serious effort to address human rights, social inequality, and other systemic issues.
But perhaps the most troubling issue with BlackRock’s approach to ESG investing is the fact that some of the countries with the poorest human rights records have the highest ESG scores. This is because ESG scores are based on self-reported data from companies, which means that companies with poor human rights records can still score well if they have policies in place to address ESG concerns. This raises serious questions about whether BlackRock’s ESG investments are actually aligned with its stated goal of promoting positive social and environmental outcomes.
One example of this is China, which has some of the worst human rights abuses in the world. Despite this, many Chinese companies have high ESG scores, thanks in part to the Chinese government’s efforts to promote green technology and renewable energy, or so they tell us.
BlackRock has invested heavily in Chinese companies, and its investments in China have grown by more than 300% in the past five years. This has led some to question whether BlackRock’s ESG investments are actually promoting positive outcomes, or whether they are simply providing cover for investments in countries with poor human rights records.
The issue of ESG investing and human rights abuses came to a head in 2021 when former Fox News host Tucker Carlson called out BlackRock for its investments in China on his program. Carlson’s criticism was focused on BlackRock’s investments in Chinese companies that manufacture surveillance equipment and other products that are used to oppress the Chinese people. Carlson argued that BlackRock’s investments were supporting China’s human rights abuses, and that American investors should be aware of the risks associated with investing in China.
In response to Carlson’s criticism, the state of Florida pulled its $150 billion pension fund out of BlackRock. This was a significant blow to BlackRock, as Florida was one of its largest clients. The move also highlighted the risks associated with ESG investing and the potential for investors to lose faith in companies that are seen as promoting social and environmental values.
Carl Higbie [1] from Newsmax, recently talked about BlackRock in a segment on Frontline:
Follow the money… You will be shocked at how much power Blackrock has… and did they weigh in on firing @TuckerCarlson [2]? WATCH pic.twitter.com/dixcHSn4Cy [3]
— Carl Higbie (@CarlHigbie) April 27, 2023 [4]
According to Reuters [5], BlackRock CEO Larry Fink sold off 7% of his stake, netting proceeds of about $25 million, after the company reported an 18% drop in its first-quarter profit.
Though there was much speculation last week about BlackRock’s investment into ‘Dominion Voting Systems’, the company has publicly denied the rumor stating, “BlackRock has no ownership stake in Dominion Voting Systems, and we are not involved in the hiring and firing of employees at public companies in which our clients are invested. Dominion Voting Systems is owned by a private equity firm that is not affiliated with BlackRock.”
BlackRock has no ownership stake in Dominion Voting Systems, and we are not involved in the hiring and firing of employees at public companies in which our clients are invested. Dominion Voting Systems is owned by a private equity firm that is not affiliated with BlackRock.
— BlackRock (@BlackRock) April 26, 2023 [6]
Finally, there’s the question of whether BlackRock’s size and influence pose a systemic risk to the global financial system. If BlackRock were to experience a significant financial shock, it could potentially trigger a chain reaction that could destabilize the markets and harm millions of investors. The fact that one company has amassed such a vast amount of assets under management raises questions that should be addressed by Congress.
So the question remains, is the world’s largest investment firm helping to gloss over human rights abuses? We’ll let you decide.
This piece was written by LifeZette on April 29, 2023. It originally appeared in LifeZette [7] and is used by permission.
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