BlackRock’s ‘No’ 1 “awakened” investment objective: huge ESG fundraiser


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Progressives love the story of Engine No. 1, a small activist investor who has just made his way to the board of directors of what many wokesters consider to be the vilest company in the world: the oil giant ExxonMobil.

Most activists – think Paul Singer and Carl Icahn – are there for the money. Engine # 1 wants to make money with a gradual twist: the fund’s founders argue that there is gold in green.

These seasoned and savvy investors say making the world a better, greener place will mean big profits for companies and bigger returns for shareholders. Wind turbines can apparently produce efficient energy at profit. Electric cars will soon replace gas guzzlers.

Whether this feeling extends beyond waking up is a matter of debate. I know a lot of investors who are not convinced that green investing is anything other than a politically induced fad that will never make money and would not get funding without government grants. As proof, they cite the world’s greenest company – electric car maker Tesla – which enjoys government subsidies and barely makes a profit despite its highly publicized stock price.

Of course, that hasn’t stopped the gradual celebrations of the news that Exxon will now have to place three representatives of the No.1 engine on its board of directors to force the change.

Driver # 1 wants the company to find ways to reduce its carbon footprint, which sounds great again until you realize that’s also a fancy way of saying it wants Exxon. do less of what it’s good for. And by the way, what does the No.1 engine know about running an oil company?

Giving credibility to this apparent madness has been one of the largest and most profitable institutional investors: BlackRock. The $ 9 trillion investment monster led by Larry Fink is perhaps the most powerful financial firm in the world because it owns shares in many large companies and can thus guide company policy.

And guess what? BlackRock backed this anonymous group of awakened activists, even as Exxon convincingly argued that the No.1 Engine was not qualified to help run an oil company. With BlackRock on the fund side, ExxonMobil finally folded like a cheap tent.

As Elon Musk continues to post Tesla's stock prices, he cannot overlook the funding he relies on from Uncle Sam just to stay profitable.
As Elon Musk continues to post Tesla’s stock prices, he cannot overlook the funding he relies on from Uncle Sam just to stay profitable.
AP Photo / Britta Pedersen, Pool, File

A spokesperson for the No.1 Engine and BlackRock did not comment. But an official at the BlackRock company said the company’s vote resulted from its fear that Exxon did not have a clear climate change strategy and that its long-term performance would suffer in a “low-emission economy. carbon”.

Fink has been a great cheerleader for what’s called ESG (environment, social and corporate governance) investing. ESG is about making sure that the companies that BlackRock owns in its multitudes of funds adhere to certain progressive decrees (like executives who don’t pay themselves too much money).

It sounds great on paper – until you dig deep. For starters, such investment methods are highly political and veer far to the left. Businesses often get high marks for supporting leftist causes like Black Lives Matter. Oil companies like Exxon will get higher marks for building wind farms that produce energy inefficiently.

Something else for investors to consider: These funds haven’t beaten the indices which are simply created to make you money and only do so when they fill up with top-flight tech names.

But here’s where Fink and BlackRock always come out on top: They felt that with all the hype about ESG investing as the next frontier, they can also make a lot of money by creating a new type of fund dedicated specifically to investing. ESG – then charge more for it.

My sources at BlackRock say that over the past year, Fink has turned the place into an ESG cultural center. Fink talks about ESG non-stop in company town halls. Seminars on ESG investing seem to take place every week. An executive by the name of Brian Deese has been promoted to push fund managers to consider ESG in all of their investment decisions.

Deese is now one of several BlackRock officials who hold key positions in the Biden administration, as director of the president’s National Economic Council.

This revolving door between Washington and Wall Street gives Fink a huge voice in US economic policy. It’s no surprise that the White House Biden is issuing new environmental rules left and right to satisfy its awakened base and, by extension, those who want awakened investments, which Fink is happy to provide.

By the end of the year, BlackRock could have up to 150 so-called ESG-compliant exchange-traded funds. ETFs are believed to have lower fees than normal funds because they mirror a typical basket of stocks like the S&P 500.

But with ESG screening methods, BlackRock has found a way to inflate the management fees of this seemingly prosaic investment. In fact, studies show that the management fees of ESG funds are over 40% higher than those of other ETFs.

BlackRock currently manages around $ 200 billion in ESG client money, which means that number is likely to grow and increase BlackRock’s profits.

Now, with the No.1 engine likely to take up three seats on Exxon’s board, it’s not too hard to see the company pass Fink’s ESG screens for its ETFs with flying colors.

In short, Fink will look like a darling of Democratic politicians, he’ll inspire a lot of wealthy leftists to invest money in what they see as “moral” stocks – and he’ll laugh all the way to the bank.

Will the rest of the investors make money? Baffles.

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About Christopher Easley

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