After ending 2021 with more than $10 trillion in assets, BlackRock Inc. remains the largest asset manager in the world. Yet chairman and CEO Larry Fink is quick to recognize continued challenges for the global economy and financial markets.
By Sylvia Carroll
BlackRock, owner of the popular iShares family of ETFs and the largest asset manager in the world, announced on January 14 that it ended 2021 with more than $10 trillion in assets under its management—a 15% increase from last year. Yet shares of the company, which also reported earnings that topped forecasts, fell more than 2% the same day as co-founder, chairman and CEO Larry Fink acknowledged continued challenges for the global economy and financial markets, noting “the world continues to navigate uncertainty and profound shifts in economies and societies at large.”
BlackRock, Inc. is an American multinational investment management corporation based in New York City. Founded by Fink, Robert S. Kapito, Susan Wagner, and other investors in 1988, initially as a risk management and fixed income institutional asset manager, BlackRock operates globally with 70 offices in 30 countries and clients in 100 countries.
Fink himself has long been one of the powerhouse figures in finance, as well as a towering symbol of leadership in business. In 2016, he received the ABANA Achievement Award, which recognizes an individual who exemplifies outstanding leadership in banking and finance and has a commitment to positive professional cooperation between the U.S. and the Middle East and North Africa. In 2018, he was ranked #28 on the Forbes list of The World’s Most Powerful People.
“I began writing these letters in the wake of the financial crisis,” Fink addressed global CEOs in an annual letter in 2021. “But over the past year, we experienced something even more far-reaching—a pandemic that has enveloped the entire globe and changed it permanently. It has both exacted a horrific human toll and transformed the way we live—the way we work, learn, access medicine, and much more.
“While some industries, particularly those that depend on people congregating in person, have suffered, others have flourished. And although the stock market recovery bodes well for growth as the pandemic subsides, the current situation remains one of economic devastation, with unemployment severely elevated, small businesses shuttering daily, and families around the world struggling to pay rent and buy food.”
PRAISE AND CONTROVERSY
Fink is nothing if not a resilient thinker. Of the founders of BlackRock, he, Kapito, Golub and Novick had worked together at First Boston, where Fink and his team were pioneers in the mortgage-backed securities market in the United States. During Fink’s tenure as head of the company, however, he would lose $100 million. Far from backing away from the industry, Fink has said that his negative experience at First Boston was the motivation to develop what he and his colleagues considered to be excellent risk management and fiduciary practices.
Over the coming years, BlackRock would draw both praise and inevitably, controversy. The company went public in 1999 and by the end of that year was managing $165 billion in assets. The U.S. government contracted with BlackRock to help resolve the fallout of the 2008 financial crisis. According to Vanity Fair, the financial establishment in Washington and on Wall Street believed BlackRock was the best choice for the job and by the end of 2009 the company had become the No. 1 asset manager worldwide. In 2013, Fortune listed BlackRock on its annual list of the world’s 50 Most Admired Companies.
Success and controversy go hand in hand. In August 2020, for example, BlackRock received approval from the China Securities Regulatory Commission to set up a mutual fund business in the country. This made the company the first global asset manager to get consent from the Chinese government to start operations in the country, prompting criticisms of BlackRock owing to China’s questionable human rights record—one of just many examples of negative publicity to hit Fink and his team.
Yet while Fink is a long-time supporter of the Democratic Party, when the Trump administration needed assistance during the COVID-19 pandemic, BlackRock was there. In March 2020, the Federal Reserve chose BlackRock to manage two corporate bond-buying programs in response to the COVID-19 pandemic, the $500 billion Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF), as well as purchase by the Federal Reserve System of commercial mortgage-backed securities (CMBS) guaranteed by the Government National Mortgage Association or Federal Home Loan Mortgage Corporation.
“The pandemic has also accelerated deeper trends, from the growing retirement crisis to systemic inequalities,” Fink wrote in his 2021 letter to CEOs. “Several months into the year, the pandemic collided with a wave of historic protests for racial justice in the United States and around the world. And more recently, it has exacerbated the political turmoil in the U.S. The events at the U.S. Capitol are a stark reminder of how vulnerable and how precious a democratic system can be.”
“Despite the darkness of the past 12 months, there have been signs of hope, including companies that have worked to serve their stakeholders with courage and conviction,” he added. “We saw businesses rapidly innovate to keep food and goods flowing during lockdowns. Companies have stepped up to support non-profits serving those in need. In one of the great triumphs of modern science, multiple vaccines were developed in record time. Strikingly, amid all of the disruption of 2020, businesses moved forcefully to confront climate risk.”
THE OTHER SIDE OF THE COIN
Larry Fink is a man aware of what is happening in the world around him. In his 2020 annual open letter to investors amid the COVID-19 pandemic, he announced environmental sustainability as a core goal for BlackRock’s future investment decisions, disclosing plans to sell US$500 million in coal investments. Among other roles, Fink serves on the board of trustees of New York University, co-chairs the NYU Langone Medical Center board of trustees.
In his 2020 annual letter to investors, Fink announced environmental sustainability as core goal for BlackRock’s future investment decisions. In this letter, he explained how climate will become a driver in economics, affecting all aspects of the economy. He also divulged in a letter to investors that BlackRock will be cutting ties with previous investments involving thermal coal and other investments that have a large environmental risk.
“In January of last year, I wrote that climate risk is investment risk,” Fink wrote in his 2021 letter to CEOs. “I said then that as markets started to price climate risk into the value of securities, it would spark a fundamental reallocation of capital. Then the pandemic took hold—and in March, the conventional wisdom was the crisis would divert attention from climate. But just the opposite took place, and the reallocation of capital accelerated even faster than I anticipated.
“From January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase over the whole of 2019. I believe that this is the beginning of a long but rapidly accelerating transition—one that will unfold over many years and reshape asset prices of every type. We know that climate risk is investment risk. But we also believe the climate transition presents a historic investment opportunity.”