Is a decarbonized economy the best investment? BlackRock CEO's annual letter sparked outrage in traditional U.S. energy states

Larry Fink, chief executive of BlackRock Inc., the world's largest asset management company, recently released a closely watched annual open letter, which, despite his attempts to balance his stance on fossil fuel consumption and climate goals, still sparked strong discontent from multiple parties, the latest of which came from Texas, a major traditional energy state in the United States.

On Wednesday, Texas Deputy Governor Dan Patrick released an open letter urging the state's auditor general to include BlackRock in the list of financial companies that cut off business ties to the state's oil and gas industry. Patrick cited a new Texas law that restricts the state from doing business with companies that refuse to work with energy companies.

"If Wall Street turns its back on Texas and our booming oil and gas industry, then Texas will no longer do business with Wall Street," Patrick wrote.

In a 2022 letter to clients released earlier this week, Fink said the investment world is at the beginning of a "structural shift" of capital to sustainable businesses. "I believe decarbonizing the global economy will create the biggest investment opportunity of our lifetime." He said. "Companies that don't adapt will be left behind, no matter what industry they're in."

He also noted that the next 1,000 unicorns will not be search engines or social media companies, but sustainable, scalable innovators — startups that help decarbonize the world and make energy transition affordable to all consumers.

However, Fink did not say in the letter that BlackRock would no longer work with energy companies. Instead, he seeks to strike a balance between the company's environmental goals of eventually achieving a decarbonized future and its obligations to investors, as BlackRock is the largest shareholder in many large companies, including oil and gas producers.

Due to BlackRock's sheer size and influence, Fink's annual open letter is seen as a bellwether for future investment trends. On Friday, BlackRock's quarterly filings revealed that the company has more than $10 trillion in assets under management and more than $4 trillion in investments in sustainable technologies.

BlackRock later said in an emailed statement that the company "will not boycott energy companies." "We will not divest from oil and gas companies as a matter of policy. We will continue to invest in these companies and work with them to maximize long-term value for our clients." ”

In addition to Texas, BlackRock is also facing shocks from other energy major states. On Monday, West Virginia Treasury Secretary Riley Moore said he would order that BlackRock no longer be involved in banking transactions in the state.

Notably, Fink's efforts to find a balance have also drawn criticism from environmentalists, arguably "unflattering on both sides." Environmentalists have stressed the urgency of decarbonisation, unhappy that BlackRock continues to invest in fossil fuel companies.