BlackRock and Vanguard were once ESG’s biggest proponents–now they seem to be reversing course (2024)

Finance giants BlackRock and Vanguard seem to be changing their approach to Environmental, Social, and Governance (ESG) investment strategies, increasingly rejecting shareholder proposals that focus on environmental and social issues.

Vanguard Group says it has only approved 2% of the environmental and social resolutions brought by shareholders in 2023, down from 12% last year, joining BlackRock in rejecting a significant number of climate and social items.

The firms’ strong support of ESG investing in recent years has led some financial advisory firms and a segment of the public to question whether financial institutions should concentrate on financial performance rather than other considerations.

BlackRock and Vanguard have a reputation for backing ESG initiatives. Yet it’s worth asking if this commitment was ever about ideology or simply a response to market demand. With recent statements from Blackrock CEO Larry Fink indicating a move away from controversial ESG terminology and a reported loss of approximately $4 billion in managed assets tied to ESG backlash, it’s clear that they’re feeling some heat. Though the loss may seem trivial for a company with over $9 trillion in assets under management, it’s far from pocket change.

The reconsideration by these two financial titans of their ESG commitments comes amidst increased attention from state-level financial authorities. Officials have questioned whether financial investment strategies should intersect so closely with environmental, social, and governance criteria. It appears these strategic shifts are being driven by a combination of public backlash and a focus on their bottom lines.

As an investor, your primary concern is the performance of your portfolio. Any factor that introduces increased volatility or lowers returns is something to be wary of. ESG, despite its intended social and environmental benefits, can add complexity that investors generally prefer to avoid. What you want as an investor is an appropriate risk-based investment strategy–one that is streamlined for delivering robust financial performance.

Financial institutions serve a critical role in managing clients’ portfolios–that should remain the central focus. It is of paramount importance that financial organizations stick to their core mission rather than diversify into complex societal debates.

While it may appear that BlackRock, Vanguard, and similar firms are shifting their attention toward traditional financial performance metrics, it’s still crucial to observe their actions carefully because they are industry leaders. Transparency is essential to ensure these major players are genuinely committed to the primary need of their investors: to focus on maximizing the returns and growth of their clients’ portfolios.

As industry leaders often set the trend, their actions may well indicate a broader shift in focus back to core financial strategies. Major financial firms have adopted ESG to keep up with the times–but they also saw it as an opportunity to make lots of money.

We can be cautiously optimistic that BlackRock and Vanguard are reverting to what they do best–optimizing client investments for financial growth.

Bob Rubin is the Founder and President of Rubin Wealth Management. He can be reached at Bob@rubinwa.com

BlackRock and Vanguard were once ESG’s biggest proponents–now they seem to be reversing course (2024)

FAQs

BlackRock and Vanguard were once ESG’s biggest proponents–now they seem to be reversing course? ›

Finance giants BlackRock and Vanguard seem to be changing their approach to Environmental, Social, and Governance (ESG) investment strategies, increasingly rejecting shareholder proposals that focus on environmental and social issues.

Is BlackRock moving away from ESG? ›

Amidst this global trend, BlackRock, the world's largest asset manager, has taken a bold step by transitioning its investment strategy from ESG investing to a broader approach called transition investing. This move has significant implications not only for BlackRock but for the entire financial industry.

Why is BlackRock bad? ›

BlackRock is also the world's largest investor in forest destruction, including in the Amazon Rainforest. Forests are massive biodiversity hubs and carbon sinks, and we can't solve climate change without protecting what's left. Behind nearly every company that cuts and burns forest for profit, you'll find BlackRock.

Why are ESG funds closing? ›

More conventional funds were launched than closed in the third quarter. "Although the motivations behind outflows cannot be perfectly quantified, many factors are in play," Stankiewicz said. "These include rising energy prices, high interest rates concerns about greenwashing, and political backlash."

What is the BlackRock approach to ESG? ›

Our approach to ESG integration focuses on identifying financially material sustainability insights – those that we believe may impact the financial performance of clients' portfolios - and including those insights into the broader mix of traditional financial information used to manage those portfolios.

Why are people pulling out of BlackRock? ›

BlackRock, as the largest global investment management company, and a leading voice in the investment community on climate and energy transition-related investment themes, has found itself at the center of a vocal anti-ESG movement by Republican politicians in the U.S., who have accused the firm of following a social ...

Is BlackRock controlling the world? ›

BlackRock is the world's largest asset manager, with over $10 trillion in assets under management. This gives it a significant amount of power and influence over the global economy.

Is BlackRock going under? ›

The Probability of Bankruptcy of BlackRock Inc (BLK) is 4.8% . This number represents the probability that BlackRock will face financial distress in the next 24 months given its current fundamentals and market conditions.

Is BlackRock an Israeli company? ›

BlackRock, Inc. is an American multinational investment company. It is the world's largest asset manager, with $10 trillion in assets under management as of December 31, 2023. Headquartered in New York City, BlackRock has 78 offices in 38 countries, and clients in 100 countries.

Who is BlackRock owned by? ›

Who owns BlackRock? BlackRock is not owned by a single individual or company. Instead, its shares are owned by a large number of individual and institutional investors. The biggest institutional shareholders such as The Vanguard Group and State Street are merely custodians of the stock for their clients.

Why are people against ESG? ›

Some opponents also believe that ESG investing is politically motivated and could lead to biased investment decisions.” In a line used by proponents, those in opposition to the ESG movement also believe there is substantial support behind them.

Why not to invest in ESG? ›

Critics say ESG investments allocate money based on political agendas, such as a drive against climate change, rather than on earning the best returns for savers. They say ESG is just the latest example of the world trying to get “woke.”

Why ESG investing doesn't work? ›

For example, ESG factors rarely focus on assigning social or environmental value to the products and services that the 'paper mills' produce; it's squarely about how the businesses are run - which makes values-based screening and impact-linked revenue streams out of scope - and arguments about a company with 'good' or ...

Is BlackRock an ethical company? ›

We lead with ethics and integrity

As a Participant of the United Nations Global Compact, BlackRock considers methods to implement practices that align its corporate operations with the universal principles on human rights, labor, environment and anti-corruption.

Who invented ESG? ›

So where does the term ESG come from? The first group to coin the phrase ESG was the United Nations Environment Programme Initiative in the Freshfields Report in October 2005.

Who started ESG? ›

A 2004 report from the United Nations – titled Who Cares Wins – carried what is widely considered the first mainstream mention of ESG in the modern context. This report leaned in heavily, encouraging all business stakeholders to embrace ESG long-term.

Did BlackRock stop ESG investing? ›

Blackrock, the world's biggest asset manager abandoned ESG investing after a wave of complaints against “woke capitalism” that made the term politically toxic. Please note, BlackRock CEO Larry Fink Is Doing 'Transition Investing' Now.

Are companies moving away from ESG? ›

Hartzmark says companies will still pay attention to the environment, social and governance issues but maybe call it something else or focus on one category more than another. Many firms have been under pressure from Republicans to back away from ESG goals, especially on climate issues.

What is the new name for BlackRock ESG? ›

BlackRock (BLK) is scrapping Environmental Social Governance (ESG) investing and instead pivoting to focus solely on the environmental component, rebranding it as "transition investing." Tariq Fancy, Former BlackRock Chief Investment Officer of Sustainable Investing and Founder of The Rumie Initiative, joins Yahoo ...

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