BlackRock's Larry Fink takes on SVB ripple effect, energy transition in annual letter

Author Erin Arvedlund
Erin Arvedlund is Pensions and Investments' enterprise editor based in New York. Prior to joining P&I, Ms. Arvedlund was most recently a business columnist at The Philadelphia Inquirer, launching her "Your Money" column in 2011. On May 7, 2001, Barron's published Ms. Arvedlund’s article "Don't Ask, Don't Tell: Bernie Madoff Attracts Skeptics in 2001." Her deep-dive investigation questioned Madoff's scheme, his demand for investor secrecy and his "enviably steady gains." That early work in covering Madoff laid the foundation for her first book, Too Good to be True: The Rise and Fall of Bernie Madoff, was published in August 2009. Arvedlund also wrote a book on the Libor scandal, Open Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions, published in September, 2014, covering how the London Interbank Offered Rate (Libor), a primary benchmark for short-term interest rates around the world, had been manipulated by major banks across the world.
Mar 15, 2023
6 months ago
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Credit: BLOOMBERG

BlackRock CEO Larry Fink on Wednesday issued his widely read annual letter, this one combined to both CEOs and shareholders, and said it's "too early to tell" how the failure of Silicon Valley Bank will ripple into the financial markets.

"This past week we saw the biggest bank failure in more than 15 years as federal regulators seized Silicon Valley Bank. This is a classic asset-liability mismatch," he wrote. Two smaller banks failed in the past week as well, he added, and "It's too early to know how widespread the damage is."

He does think it is inevitable some banks will pull back on lending and that stricter capital standards for banks are likely.

Amid growing political anti-ESG backlash, Mr. Fink took a more measured approach in his letter when it came to environmental, social and governance investing. He did not use the acronym ESG once in his letter, with more of a focus on investor choice around sustainable investing and the energy transition.

"Many of our clients also want access to data to ensure that material sustainability risk factors that could impact long-term asset returns are incorporated into their investment decisions," he wrote. "This is why we partner with other companies and provide insights into how a changing climate and the transition may affect portfolios over the long term."

He said it was not the role of BlackRock or other asset managers to "engineer a particular outcome in the economy."

"Government policy, technological innovation, and consumer preferences will ultimately determine the pace and scale of decarbonization. Our job is to think through and model different scenarios to understand implications for our clients' portfolios," he said. "That's why BlackRock has been so vocal in recent years in advocating for disclosures and asking questions about how companies plan to navigate the energy transition. As minority shareholders, it's not our place to be telling companies what to do. My letters to CEOs are written with a single goal: to ensure companies are going to generate durable, long-term investment returns for our clients."

He pointed out that oil and gas still have a "vital role in meeting global energy demands," and that BlackRock continues to invest in fossil fuels during the energy transition.

"We are working with energy companies globally that are essential in meeting societies' energy needs. To ensure the continuity of affordable energy prices during the transition, fossil fuels like natural gas, with steps taken to mitigate methane emissions, will remain important sources of energy for many years ahead. BlackRock is also investing, on behalf of our clients, in responsibly-managed natural gas pipelines. For example, in the Middle East, we invested in one of the largest pipelines for natural gas, which will help the region utilize less oil for power production."

More information to follow.

Author Erin Arvedlund
Erin Arvedlund is Pensions and Investments' enterprise editor based in New York. Prior to joining P&I, Ms. Arvedlund was most recently a business columnist at The Philadelphia Inquirer, launching her "Your Money" column in 2011. On May 7, 2001, Barron's published Ms. Arvedlund’s article "Don't Ask, Don't Tell: Bernie Madoff Attracts Skeptics in 2001." Her deep-dive investigation questioned Madoff's scheme, his demand for investor secrecy and his "enviably steady gains." That early work in covering Madoff laid the foundation for her first book, Too Good to be True: The Rise and Fall of Bernie Madoff, was published in August 2009. Arvedlund also wrote a book on the Libor scandal, Open Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions, published in September, 2014, covering how the London Interbank Offered Rate (Libor), a primary benchmark for short-term interest rates around the world, had been manipulated by major banks across the world.