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Westlake Legal Group > Posts tagged "Fink, Laurence D"

In Argentina’s Debt Negotiations, a Kinder, Gentler Capitalism Faces a Test

LONDON — Laurence D. Fink presents himself as the vanguard of a progressive form of capitalism in which profits are not everything: The enlightened money is supposed to press for environmental and social protection.

As the chief executive of BlackRock, the world’s largest investment management company, Mr. Fink oversees more than $7 trillion. He has steered some of that fortune to the crisis-wracked nation of Argentina, purchasing government bonds.

But as Argentina — in default since May — seeks forgiveness on $66 billion worth of bonds, Mr. Fink’s oft-espoused faith in “stakeholder capitalism” is colliding with traditional bottom line imperatives. Though poverty is soaring in Argentina as the pandemic worsens a punishing economic downturn, BlackRock is opposing a settlement proposed by the government and rallying other creditors to reject it, while holding out for a marginally improved deal.

Mr. Fink has inserted himself into the negotiations, speaking twice with Argentina’s economy minister, according to three people familiar with the talks. The government and its creditors are only three pennies on the dollar apart on their proposed terms.

“The BlackRock guys have gotten on the phone with a number of significant creditors,” said Hans Humes, president of Greylock Capital Management, another creditor at the table. “They convinced a lot of people that if we all stepped up behind their deal, the Argentines would take it. It’s turned into a brutal standoff.”

BlackRock’s stance has put it at odds with the International Monetary Fund, which gave Argentina a rescue package worth more than $50 billion two years ago, and has supported Argentina’s proposal as an Aug. 4 deadline approaches.

ImageWestlake Legal Group merlin_146284194_cbc130c9-6ac7-407a-8d12-7206f9904c77-articleLarge In Argentina’s Debt Negotiations, a Kinder, Gentler Capitalism Faces a Test Stiglitz, Joseph E Poverty Pensions and Retirement Plans Macri, Mauricio International Monetary Fund Gramercy Funds Management LLC Government Bonds Georgieva, Kristalina Ivanova Fink, Laurence D Fernandez, Alberto (1959- ) Economic Conditions and Trends Corporate Social Responsibility Coronavirus (2019-nCoV) Business Roundtable BlackRock Inc Argentina
Credit…Krista Schlueter for The New York Times

The fund’s managing director, Kristalina Georgieva, has praised Argentina’s approach and emphasized that bondholders must agree to substantial debt forgiveness so Argentina can manage future payments. Fund officials have assured the government that they will forge a new bailout if Argentina cannot complete a deal.

The alternative would be an unruly default that would prevent Argentina from tapping international markets, block its companies from gaining access to capital and deepen the recession.

BlackRock’s position has also put it crosswise with a group of prominent economists, including a pair of Nobel laureates, Joseph Stiglitz and Edmund Phelps. In May, they issued a public letter urging bondholders to come to terms with the government.

“Argentina has presented a responsible offer to creditors that reflects the country’s capacity to pay,” declared the letter, which was signed by 138 economists, among them Carmen Reinhart, now the chief economist at the World Bank.

In a statement, BlackRock said it has been working diligently to achieve a settlement, while recouping as much as possible for its clients. Roughly two-thirds of the investments it manages comprise the retirement savings of workers around the world.

“In this restructuring process, our fund managers are balancing a fiduciary obligation to make decisions in the best interest of these savers, while at the same time recognizing the difficult circumstances facing the Argentine government, including the challenges posed by Covid-19,” the statement said.

Credit…Juan Ignacio Roncoroni/EPA, via Shutterstock

The standoff in Argentina reflects the complexity of debt negotiations in an era in which regular people are effectively at the table. In decades past, bonds issued by developing countries were overwhelmingly controlled by major banks. When governments could not pay, bank chiefs hammered out a deal. Today, investors holding emerging market bonds run the gamut from specialized funds with high tolerance for risk to conservative pension funds.

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That Mr. Fink’s company is playing a primary role in pressuring Argentina contrasts with his campaign to make business a force for social progress.

Two years ago, Mr. Fink — who has been mentioned in news reports as a potential Treasury secretary in a Biden administration — wrote an open letter to the chief executives of major corporations urging them to focus on social, labor and environmental concerns.

“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he wrote.

Last year, Mr. Fink signed the Statement on the Purpose of a Corporation crafted by the Business Roundtable, an association of American chief executives. It pledged “a fundamental commitment to all of our stakeholders.”

In January, Mr. Fink wrote another letter to C.E.O.s warning that companies that fail to address climate change would be punished in the marketplace.

BlackRock has launched funds tailored to so-called impact investing, with money directed at advancing social and environmental goals.

Credit…Remo Casilli/Reuters

Argentina is now consumed with stemming an alarming increase in poverty. Once among the richest countries on earth, it has defaulted on its government debt nine times.

Argentina’s history has been dominated by populist governments that have won political favor by dispensing subsidies and cash to the masses in brazen disregard for budget arithmetic, yielding chronic inflation and frequent crises.

The last government, headed by President Mauricio Macri, assumed power in 2015 with a mandate to restore discipline toward regaining the confidence of international markets, while also showing compassion to the poor through social spending.

Among those impressed was Mr. Fink. Six months after Mr. Macri took office, the BlackRock chief said his administration “has really shown what a government can do if it is focusing on trying to change the future of its country.”

In the end, Mr. Macri acquired a reputation for muddling through, failing to produce growth while borrowing anew.

When a new president, Alberto Fernández, took office last year, many assumed that populism was back. But Mr. Fernández quickly reassured the I.M.F. and key creditors that he was a pragmatist intent on securing a workable debt settlement.

The I.M.F. had long been accused of wielding a single blunt instrument in the face of crisis — austerity. Its rescue package in Argentina two decades ago imposed crippling cuts to government programs, sowing enduring bitterness. Ms. Georgieva, the fund’s managing director, has sharpened a focus on protecting countries from impossible debt burdens.

Credit…Juan Ignacio Roncoroni/EPA, via Shutterstock

BlackRock is part of a consortium called the Ad Hoc Argentine Bondholder Group, which controls about one-fourth of the bonds.

The Ad Hoc group has struck a unified front in rejecting the government’s latest offer, which would pay out 53 cents on the dollar value of the bonds. Last week, it presented its own proposal seeking improved terms — more than 56 cents on the dollar.

In a letter sent Monday to Argentina’s economy minister, Martín Guzmán, the group said it had gained the support of a majority of all bondholders, giving it the power to block the deal. Under the bond covenants, an agreement to write down their value must win the support of the holders of two-thirds of their value.

In a statement, the Ad Hoc group said it was operating in the interest of the Argentine public by seeking a deal that would “allow re-access to capital markets and encourage further investment.”

But some creditors have publicly supported the government’s proposal.

“Argentina has made a reasonable offer, which I believe the creditors should accept, especially in light of the health and poverty situation in the country,” said Mohamed A. El-Erian, chief economic adviser at Allianz SE, the parent company of Pacific Investment Management Company, one of the world’s largest bond managers. He has been advising a creditor at the table, Gramercy Funds Management LLC, an emerging markets specialist.

Gramercy has concluded that differences between the government’s offer and the Ad Hoc group’s proposal are trivial compared with the risk of a comprehensive default that would diminish the value of Argentine bonds, subject creditors to years of potential litigation and intensify the nation’s crisis.

Credit…Esteban Collazo, via Agence France-Presse — Getty Images

Additional debt forgiveness also enhances the likelihood that Argentina can manage its future payments, lifting the value of outstanding bonds, and lowering borrowing costs for Argentine companies.

“For three points you’re willing to lose 20 or 30,” said Mr. Humes, the Greylock president. “It’s just insanity. It’s unfortunate when egos and inexperience get in the way of a pragmatic solution.”

Some say the government overplayed its hand, antagonizing creditors with an unreasonably low opening offer — less than 40 cents on the dollar.

“Guzman started off with a very lowball offer,” said Siobhan Morden, a Latin America bond analyst at Amherst Pierpont Securities, an independent broker. “This has been an unnecessary distraction for months that could have been avoided if the opening offer had been more reasonable.”

Negotiations were conducted via Zoom, involving dozens of different creditors. BlackRock’s representatives clashed with Argentina’s economy minister, Mr. Guzmán, a 37-year-old economist who studied with Mr. Stiglitz at Columbia University.

Credit…Juan Mabromata/Agence France-Presse — Getty Images

In May, Mr. Fink called Mr. Guzmán to try to break the impasse, suggesting that a deal could be had if the government lifted its offer to the range of 50 to 55 cents on the dollar, the people familiar with the talks said.

In private consultations with BlackRock, the government offered 50 cents. But BlackRock and its Ad Hoc group held out for more.

Mr. Fink complained that it was unfair that private creditors were swallowing all the losses, arguing that the I.M.F. should forgive some of its loans — a non-starter.

In early July, Mr. Guzmán sweetened the terms, offering 53 cents on the dollar. That won the support of several creditors, including Gramercy and Greylock.

By then, the pandemic was deepening Argentina’s recession just as the government required extra funds for the public health emergency. But BlackRock began a behind-the-scenes campaign to block the deal.

The government has insisted that its offer is final. With child poverty exceeding 50 percent, officials say, paying more to creditors would amount to transferring wealth from people who have almost nothing to international investors.

On a recent morning, about 100 families showed up at a soup kitchen 25 miles west of Buenos Aires — more than twice as many as in March. Among them was Ángel Ariel Coronel, a plumber who lives nearby with his wife and their 2-year-old son. A strict lockdown imposed by the government has halted the construction projects where he has worked.

“My wife was a bit embarrassed about having to come here,” said Mr. Coronel as he waited for a portion of steaming lentils. “But I don’t care. We need the help. I haven’t worked a day since this whole thing started.”

Credit…Natacha Pisarenko/Associated Press

Peter S. Goodman reported from London and Daniel Politi from Buenos Aires.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

BlackRock Becomes a Symbol for Anticapitalist Fervor in France

Westlake Legal Group 00blackrock-1-facebookJumbo BlackRock Becomes a Symbol for Anticapitalist Fervor in France Pensions and Retirement Plans Organized Labor Macron, Emmanuel (1977- ) France Fink, Laurence D Demonstrations, Protests and Riots BlackRock Inc

PARIS — The video shows footprints in blood-red paint tracked by militant protesters across BlackRock’s French headquarters. Documents litter the floors. On the walls, black spray-painted graffiti denounces the company as “criminal.”

Just a few months ago, BlackRock, the U.S. money-management giant, was barely known to the general public in France. But as President Emmanuel Macron presses ahead with a controversial campaign to overhaul the French economy, the company has become a favorite target for growing anticapitalist sentiment.

Protesters claim BlackRock has tried to influence — and stands to profit from — Mr. Macron’s sweeping overhaul of the nation’s pension system. They point to cordial meetings between Mr. Macron and Laurence D. Fink, the founder and chief executive of BlackRock. And they fear the massive Wall Street firm — its $7 trillion under management is more than twice France’s economic output — is working behind the scenes to pick apart the country’s system of social protections.

The protests escalated with the action on Monday morning, when environmental activists who allege French workers’ pensions could be directed by BlackRock stormed the company’s offices.

Last month, it was trade unions and members of the Yellow Vest movement leading a raucous crowd to the historic Le Centorial building, where BlackRock has its offices, lighting flares and denouncing what they said was an effort to impose American-style free-market rules on France.

There is no evidence that BlackRock influenced Mr. Macron to push retirement savings to it or any other financial giant, although financial firms could get some business from part of the pension reform that encourages high-earners to invest in stocks.

And BlackRock strenuously denies the claims. “We deplore the fact that our company continues to be caught up in an unfounded controversy driven by political objectives,” it said in a statement. “We reiterate that BlackRock has never been involved in the current pension reform project and does not intend to be.”

Yet BlackRock’s role as an adviser to governments and central banks and as a major shareholder in some of the world’s biggest companies has quickly made it a symbol in a country that has long been deeply skeptical of capitalism and the stock market. The social climate here has grown more tense following recent nationwide strikes to protest the pension overhaul.

The attacks over BlackRock’s environmental policies come as the company has tried to portray itself as an industry leader in responsible investing. The protesters Monday cited BlackRock investments in the French oil giant Total and the construction company Vinci as running counter to that.

In an influential annual letter to leaders of the world’s largest companies, Mr. Fink said last month that his firm would make investment decisions with environmental sustainability as a core goal. On Wednesday, BlackRock said that one of its fast-growing green-oriented funds would stop investing in companies that get revenue from the Alberta oil sands.

Such actions have done little to placate the company’s growing cadre of critics in France, where it manages 27 billion euros in assets for local clients and invests over 185 billion euros, or $200 billion, in French equities, and corporate and government bonds.

Parliament will start debating next week the bill that aims to overhaul the nation’s convoluted pension system. Although the system has been criticized for being too generous, the incidence of poverty among older people in France is one of the lowest in the world — and far lower than in the United States.

The measure seems likely to pass because Mr. Macron’s party commands an absolute majority, despite attempts by opponents to obstruct the bill with more than 22,000 amendments. It is expected to move to the Senate in April.

In the meantime, more demonstrations have been called, including new strikes and protests next Thursday. BlackRock is likely to remain a ripe target for frustration.

The controversy broke open in December, when Mr. Macron unveiled details of his proposal to standardize France’s 42 different public and private pension schemes into one state-managed plan. Critics had already accused the president, a former investment banker, of favoring the rich with an earlier measure to reduce taxes on high earners, a step that resonated in a country where wealth is increasingly associated with injustice.

Opponents seized on a public BlackRock analyst note describing pension investment options in France — a sign, they said, that Wall Street’s biggest asset manager was seeking to profit.

The document noted that the investment-wary French hold huge piles of savings in cash, bonds and nonfinancial assets, but “disappointingly” little in stocks. (A recent study by the International Monetary Fund showed that only 5 percent of French households’ total financial assets are in stocks. That figure is nearly 34 percent for U.S. households, according to 2016 data from the Organization for Economic Cooperation and Development.)

Soon, activists began circulating photos on social media of Mr. Fink sitting next to Mr. Macron at a green finance summit in the Élysée Palace last July as proof of chummy ties.

French media ran articles highlighting BlackRock’s assessment as a sign that the company was eager to see France’s state-run pension scheme tilt toward the American system, where workers often save for pensions through investments.

In reality, Mr. Macron’s blueprint would instead largely keep France’s publicly funded pay-as-you-go system in place, a point some trade unions have recently acknowledged. An editorial Wednesday in the French economic magazine Le Point defended BlackRock as being the victim of “conspiratorial diatribes,” adding that the company was being made into a “new French scapegoat.”

Opponents insist that Mr. Macron’s plan still opens France to the influence of companies like BlackRock.

They point to a measure that would cut pension payroll taxes on people earning more than 120,000 euros annually — less than 1 percent of France’s work force — and encourage them to invest in private pension funds.

Addressing the National Assembly, Olivier Marleix, a conservative lawmaker from France’s Les Republicains party, said the proposal would divert money away from France’s social safety net. “You are offering three billion euros to pension funds,” he said. “BlackRock’s business will thrive in France.”

It didn’t help BlackRock’s image among dissidents when Mr. Macron elevated the president of BlackRock France, Jean-François Cirelli, a former civil servant who worked for two previous French presidents, to the rank of officer of the Legion of Honor, France’s highest order of merit, just as strikes over the pension reforms reached a crescendo in early January.

The news lit up social media and triggered a fresh storm of criticism that the American fund was too cozy with Mr. Macron, and would profit from the pension changes.

“BlackRock is simply the dark side of the pension reform,” Olivier Faure, the secretary general of France’s Socialist Party, told French television.

Mr. Cirelli hit back at what he said was “an unfounded and irrational” controversy.

“We are being used for political ends in a conflict that is not ours,” he said, adding that BlackRock “is not a pension fund, does not distribute any retirement savings product, and has no intention of doing so.”

Such statements have not appeased opponents. “BlackRock is an emblem,” said Benoît Martin, the head of the Paris branch of the militant General Confederation of Labor, or C.G.T. union. Mr. Martin said he was among the first wave of protesters to storm BlackRock France’s headquarters in January.

“You have Larry Fink meeting with President Macron,” he added. “We’re concerned about the influence of BlackRock in French politics.”

The union has called for more demonstrations and strikes to protest the changes. And BlackRock, Mr. Martin said, would likely remain a target.

Youth for Climate France, one of the groups that ransacked the offices on Monday, said in a statement that the protests were “symptomatic of capitalism, which is at the origin of these problems.”

“By attacking BlackRock, we’re attacking capitalism,” the group said.

Constant Méheut contributed reporting.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

BlackRock Will Put Climate Change at Center of Investment Strategy

Westlake Legal Group 14db-sorkin1-facebookJumbo BlackRock Will Put Climate Change at Center of Investment Strategy Stocks and Bonds Global Warming Fink, Laurence D Corporate Social Responsibility BlackRock Inc

Laurence D. Fink, the founder and chief executive of BlackRock, plans to announce Tuesday that his firm will make investment decisions with environmental sustainability as a core goal.

BlackRock is the largest in its field, with nearly $7 trillion under management, and this move will fundamentally shift its investing policy — and could reshape how corporate America does business and put pressure on other large money managers to follow suit.

Mr. Fink’s annual letter to the chief executives of the world’s largest companies is closely watched, and in the 2020 edition he said BlackRock would begin to exit certain investments that “present a high sustainability-related risk,” such as those in coal producers. His intent is to encourage every company, not just energy firms, to rethink their carbon footprints.

“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Mr. Fink wrote in the letter, which was obtained by The New York Times. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”

The firm, he wrote, would also introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability, and press companies to disclose plans “for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized.”

Mr. Fink has not always been the first to address social issues, but his annual letter — such as his dictum two years ago that companies needed to have a purpose beyond profits — has the influence to change the conversations inside boardrooms around the globe.

And now Mr. Fink is sounding an alarm on a crisis that he believes is the most profound in his 40 years in finance. “Even if only a fraction of the science is right today, this is a much more structural, long-term crisis,” he wrote.

A longtime Democrat, Mr. Fink insisted in an interview that the decision was strictly business. “We are fiduciaries,” he said. “Politics isn’t part of this.”

BlackRock itself has come under criticism from both industry and environmental groups for being behind on pushing these issues. Just last month, a British hedge fund manager, Christopher Hohn, said that it was “appalling” of BlackRock not to require companies to disclose their sustainability efforts, and that the firm’s previous efforts had been “full of greenwash.”

Climate activists staged several protests outside BlackRock’s offices last year, and Mr. Fink himself has received letters from members of Congress urging more action on climate-related investing. According to Ceres and FundVotes, a unit of Morningstar, BlackRock had among the worst voting records on climate issues.

In recent years, many companies and investors have committed to focusing on the environmental impact of business, but none of the largest investors in the country have been willing to make it a central component of their investment strategy.

In that context, Mr. Fink’s move is a watershed — one that could spur a national conversation among financiers and policymakers. However, it’s also possible that some of the most ardent climate activists will see it as falling short.

Even so, the new approach may put pressure on the other large money managers and financial firms in the United States — Vanguard, T. Rowe Price and JPMorgan Chase, among them — to articulate more ambitious strategies around sustainability.

When 631 investors from around the world, representing some $37 trillion in assets, signed a letter last month calling on governments to step up their efforts against climate change, the biggest American firms were conspicuously absent.

BlackRock’s decision may give C.E.O.s license to change their own companies’ strategy and focus more on sustainability, even if doing so cuts into short-term profits. Such a shift could also provide cover for banks and other financial institutions that finance carbon-emitting businesses to change their own policies.

Had Mr. Fink moved a decade ago to pull BlackRock’s funds out of companies that contribute to climate change, his clients would have been well served. In the past 10 years, through Friday, companies in the S&P 500 energy sector had gained just 2 percent in total. In the same period, the broader S&P 500 nearly tripled.

In an interview, Mr. Fink said the decision developed from conversations with “business leaders and how they’re thinking about it, talking to different scientists, reading different research.” Mr. Fink asked BlackRock to research the economic impacts of climate change; it found that they are already appearing in a meaningful way in the form of higher insurance premiums, for fires and floods, and expects cities to have to pay more for their bonds.

Wherever he goes, he said, he is bombarded with climate questions from investors, often to the exclusion of issues that until recently were once considered more important. “Climate change is almost invariably the top issue that clients around the world raise with BlackRock,” he wrote in his letter.

He wrote that he anticipated a major shift, much sooner than many might imagine, in the way money will be allocated.

“This dynamic will accelerate as the next generation takes the helm of government and business,” he wrote. “As trillions of dollars shift to millennials over the next few decades, as they become C.E.O.s and C.I.O.s, as they become the policymakers and heads of state, they will further reshape the world’s approach to sustainability.”

While BlackRock makes its green push, the Trump administration is going in the opposite direction, repealing and weakening laws aimed at protecting the environment and promoting sustainability. Indeed, Mr. Fink’s effort appeared to be another example of the private sector pressing on issues that the White House has abandoned.

Still, Mr. Fink made plain that while he intends for the firm to consider climate risks, he would not pursue an across-the-board sale of energy companies that produce fossil fuels. Because of its shear size, BlackRock will remain one of the world’s largest investors in fossil-fuel companies.

“Despite recent rapid advances in technology, the science does not yet exist to replace many of today’s essential uses of hydrocarbons,” he wrote. “We need to be mindful of the economic, scientific, social and political realities of the energy transition.”

BlackRock manages money for countries across the globe as well as states and municipalities across the nation. It could face opposition for its new stance in areas that benefit from fossil fuels, like countries in the Middle East or states where oil has become a significant part of their economies.

Mr. Fink said that because much of the money BlackRock manages is invested in passive index funds like those that track the S&P 500, the firm was unable to simply sell shares in companies that it felt were not focused on sustainability. But he did say that the firm could do so in what are known as “actively managed funds,” in which BlackRock can choose which stocks are included.

BlackRock also plans to offer new passive funds — including target-date funds that are based on a person’s age and are meant to be used to prepare for retirement — that will not include fossil fuel companies. Investors will be able to choose these instead of more traditional funds. To the extent that fossil fuel companies are in an index, BlackRock plans to push them to consider their eventual transition to renewable energy. Mr. Fink said the company would vote against them if they are not moving fast enough.

“We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them,” he wrote.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

BlackRock Will Put Climate Change at Center of Investment Strategy

Westlake Legal Group 14db-sorkin1-facebookJumbo BlackRock Will Put Climate Change at Center of Investment Strategy Stocks and Bonds Global Warming Fink, Laurence D Corporate Social Responsibility BlackRock Inc

Laurence D. Fink, the founder and chief executive of BlackRock, plans to announce Tuesday that his firm will make investment decisions with environmental sustainability as a core goal.

BlackRock is the largest in its field, with nearly $7 trillion under management, and this move will fundamentally shift its investing policy — and could reshape how corporate America does business and put pressure on other large money managers to follow suit.

Mr. Fink’s annual letter to the chief executives of the world’s largest companies is closely watched, and in the 2020 edition he said BlackRock would begin to exit certain investments that “present a high sustainability-related risk,” such as those in coal producers. His intent is to encourage every company, not just energy firms, to rethink their carbon footprints.

“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Mr. Fink wrote in the letter, which was obtained by The New York Times. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”

The firm, he wrote, would also introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability, and press companies to disclose plans “for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized.”

Mr. Fink has not always been the first to address social issues, but his annual letter — such as his dictum two years ago that companies needed to have a purpose beyond profits — has the influence to change the conversations inside boardrooms around the globe.

And now Mr. Fink is sounding an alarm on a crisis that he believes is the most profound in his 40 years in finance. “Even if only a fraction of the science is right today, this is a much more structural, long-term crisis,” he wrote.

A longtime Democrat, Mr. Fink insisted in an interview that the decision was strictly business. “We are fiduciaries,” he said. “Politics isn’t part of this.”

BlackRock itself has come under criticism from both industry and environmental groups for being behind on pushing these issues. Just last month, a British hedge fund manager, Christopher Hohn, said that it was “appalling” of BlackRock not to require companies to disclose their sustainability efforts, and that the firm’s previous efforts had been “full of greenwash.”

Climate activists staged several protests outside BlackRock’s offices last year, and Mr. Fink himself has received letters from members of Congress urging more action on climate-related investing. According to Ceres and FundVotes, a unit of Morningstar, BlackRock had among the worst voting records on climate issues.

In recent years, many companies and investors have committed to focusing on the environmental impact of business, but none of the largest investors in the country have been willing to make it a central component of their investment strategy.

In that context, Mr. Fink’s move is a watershed — one that could spur a national conversation among financiers and policymakers. However, it’s also possible that some of the most ardent climate activists will see it as falling short.

Even so, the new approach may put pressure on the other large money managers and financial firms in the United States — Vanguard, T. Rowe Price and JPMorgan Chase, among them — to articulate more ambitious strategies around sustainability.

When 631 investors from around the world, representing some $37 trillion in assets, signed a letter last month calling on governments to step up their efforts against climate change, the biggest American firms were conspicuously absent.

BlackRock’s decision may give C.E.O.s license to change their own companies’ strategy and focus more on sustainability, even if doing so cuts into short-term profits. Such a shift could also provide cover for banks and other financial institutions that finance carbon-emitting businesses to change their own policies.

Had Mr. Fink moved a decade ago to pull BlackRock’s funds out of companies that contribute to climate change, his clients would have been well served. In the past 10 years, through Friday, companies in the S&P 500 energy sector had gained just 2 percent in total. In the same period, the broader S&P 500 nearly tripled.

In an interview, Mr. Fink said the decision developed from conversations with “business leaders and how they’re thinking about it, talking to different scientists, reading different research.” Mr. Fink asked BlackRock to research the economic impacts of climate change; it found that they are already appearing in a meaningful way in the form of higher insurance premiums, for fires and floods, and expects cities to have to pay more for their bonds.

Wherever he goes, he said, he is bombarded with climate questions from investors, often to the exclusion of issues that until recently were once considered more important. “Climate change is almost invariably the top issue that clients around the world raise with BlackRock,” he wrote in his letter.

He wrote that he anticipated a major shift, much sooner than many might imagine, in the way money will be allocated.

“This dynamic will accelerate as the next generation takes the helm of government and business,” he wrote. “As trillions of dollars shift to millennials over the next few decades, as they become C.E.O.s and C.I.O.s, as they become the policymakers and heads of state, they will further reshape the world’s approach to sustainability.”

While BlackRock makes its green push, the Trump administration is going in the opposite direction, repealing and weakening laws aimed at protecting the environment and promoting sustainability. Indeed, Mr. Fink’s effort appeared to be another example of the private sector pressing on issues that the White House has abandoned.

Still, Mr. Fink made plain that while he intends for the firm to consider climate risks, he would not pursue an across-the-board sale of energy companies that produce fossil fuels. Because of its shear size, BlackRock will remain one of the world’s largest investors in fossil-fuel companies.

“Despite recent rapid advances in technology, the science does not yet exist to replace many of today’s essential uses of hydrocarbons,” he wrote. “We need to be mindful of the economic, scientific, social and political realities of the energy transition.”

BlackRock manages money for countries across the globe as well as states and municipalities across the nation. It could face opposition for its new stance in areas that benefit from fossil fuels, like countries in the Middle East or states where oil has become a significant part of their economies.

Mr. Fink said that because much of the money BlackRock manages is invested in passive index funds like those that track the S&P 500, the firm was unable to simply sell shares in companies that it felt were not focused on sustainability. But he did say that the firm could do so in what are known as “actively managed funds,” in which BlackRock can choose which stocks are included.

BlackRock also plans to offer new passive funds — including target-date funds that are based on a person’s age and are meant to be used to prepare for retirement — that will not include fossil fuel companies. Investors will be able to choose these instead of more traditional funds. To the extent that fossil fuel companies are in an index, BlackRock plans to push them to consider their eventual transition to renewable energy. Mr. Fink said the company would vote against them if they are not moving fast enough.

“We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them,” he wrote.

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How Shareholder Democracy Failed the People

Westlake Legal Group 19db-sorkin1-facebookJumbo How Shareholder Democracy Failed the People Stocks and Bonds Pensions and Retirement Plans Jones, Paul Tudor II Income Inequality Friedman, Milton Fink, Laurence D Dimon, James Council of Institutional Investors Corporations Business Roundtable

Democracy is a messy thing. Shareholder democracy may be even messier.

For nearly a half-century, corporate America has prioritized, almost maniacally, profits for its shareholders. That single-minded devotion overran nearly every other constituent, pushing aside the interests of customers, employees and communities.

That philosophy was rooted in an idea that has an air of nobility about it. Shareholder democracy was the name given to investors asserting themselves in corporate governance. The idea was that investors would wrest control of companies from entrenched managers, letting the actual owners set their corporate priorities. But what we really got was something else: an era of shareholder primacy.

That may have a chance — a chance — of changing now that 181 chief executives have lent their signatures to a new “Statement on the Purpose of a Corporation” that was published by the Business Roundtable on Monday. The statement from the leaders of companies including JPMorgan Chase, Apple, Amazon and Walmart affirms that the nation’s largest companies have a “fundamental commitment” to all their stakeholders: putting employees, suppliers and communities on a pedestal that once belonged only to shareholders.

The companies’ statement is a significant shift and a welcome one. For years, businesses have resisted calls — including from this column — to rethink their responsibility to society. In response, corporations typically dismissed hot-button topics like income inequality, climate change, gun violence and more as political issues unrelated to them.

Some will doubt the sincerity of these business leaders’ words, and it remains an open question whether their companies will be held accountable — and by whom. But what we may be at the start of is less a new era and more a return to the past.

For nearly 50 years — following the publication of a seminal academic treatise in 1932 called “The Modern Corporation and Private Property” by Adolf A. Berle Jr. and Gardiner C. Means — corporations, for the most part, were run for all stakeholders. It was a time defined by organized labor, corporate pension programs, gold-watch retirements and charitable gifts from companies that invested heavily in their communities and the kind of research that promised future growth.

It is a period often referred to — sometimes derisively — as “managerialism.”

But by the 1970s, managerialism became synonymous in investment circles with immovable executives who were running bloated businesses more for their own benefit than for their shareholders.

It also coincided with the ascent of Milton Friedman, the University of Chicago economist who preached a gospel of profits-as-purpose and mocked anyone who thought that businesses should do anything else.

“What does it mean to say that ‘business’ has responsibilities?” Mr. Friedman wrote in this newspaper in 1970. “Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

That began the rise of shareholder democracy, an idea that the public and news media embraced. Shareholders and, in turn, a new class of investors known as corporate raiders convinced executives to slash any and all fat from their budgets or risk being taken over or voted out. Layoffs increased, research and development budgets were cut, and pension programs were traded for 401(k)s. There was a rush of mergers driven by “cost savings” that grabbed headlines while profits soared and dividends increased.

And here we are. Americans mistrust companies to such an extent that the very idea of capitalism is now being debated on the political stage. Populism has been embraced on both ends of the political spectrum, whether in the trade protectionism of President Trump or the social-net supremacy of Senator Bernie Sanders.

It is against that backdrop that the Business Roundtable released its statement on Monday. The group should be commended for coming around — and no one wants to criticize progress — but it is undeniably late.

Make no mistake, it wasn’t shareholder democracy that created this new enlightened moment. Public outrage pushed this forward. So did anger in Washington and regulatory scrutiny that is finally coming to bear.

Shareholders — with some exceptions — did not come around until they had no choice but to realize that these forces could have an impact on their investments.

And in an echo of managerialism, there are some corporate executives who deserve credit for this change.

Larry Fink, the chairman of BlackRock, deserves to be doing laps for putting these ideas into his annual letters years ago, when some of those who signed Monday’s statement laughed at the idea.

Credit should go, too, to Howard Schultz, the former chief executive of Starbucks, whose company embraced its employees as stakeholders from the beginning. And companies like Patagonia and Ben and Jerry’s, which are so-called B Corporations, committed to community principles early.

The investor Paul Tudor Jones II has been talking about this for years. So has Judith F. Samuelson, an executive director at the Aspen Institute who has pressed corporate leaders to embrace a view of service to society, and told me about a dinner where she and others leaned on Jamie Dimon, the JPMorgan chief executive and chairman of the Business Roundtable, to change the group’s mission statement.

And there was Prof. Klaus Schwab, who founded the World Economic Forum, drafting the Davos Manifesto of 1973: “The purpose of professional management is to serve clients, shareholders, workers and employees, as well as societies, and to harmonize the different interests of the stakeholders.”

If you suspect that the Business Roundtable’s statement changes little, there may be reason for skepticism. Some big companies didn’t sign on, including the Blackstone Group, General Electric and Alcoa.

And the Council of Institutional Investors — which represents many of the same companies as Business Roundtable and many of the nation’s largest pension funds — distributed a response that forcefully disavowed the ideas set forth in the roundtable’s statement.

“Accountability to everyone means accountability to no one,” the council said. “It is government, not companies, that should shoulder the responsibility of defining and addressing societal objectives with limited or no connection to long-term shareholder value.”

For whatever progress may have been made Monday, it is hardly clear the debate is over. In fact, the fight for corporate identity is just beginning.

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