Purpose on Payday March 2024

Larry Fink’s annual letter to investors grabbed headlines this week. The letter, or essay, from the BlackRock Chairman and CEO, has become an annual news event, where the media and investment experts look to one of the world’s most influential investors for a steer on economic trends.

Since 2020, sustainability, ESG and the shift to stakeholder capitalism have been common themes. Fink has also been clear about the threat of climate change to businesses and the global economy, calling for climate action. And while not without his sceptics, he can be credited with energising the growth in ESG investing in recent years.

However, with a Republican backlash against ESG in the US, it is perhaps no surprise that there was no mention of ESG in the letter this year, and just a couple of passing mentions of sustainability / sustainable investing. This follows Fink saying last year that he wouldn’t use the term ESG anymore as it was too politicised, and headlines this week about millions of dollars being pulled from Blackrock in an anti-ESG campaign, show the toxicity of the term among some groups.

But, reading between the lines, what we are seeing here is more of a subtle rebrand than backtracking. Talking about the urgent need to provide financially secure retirement for an aging population, the letter goes onto the importance of investing in renewable energy to meet future demands and to ensure energy security in a time of high geo-political risk. The need to decarbonise and achieve energy security has shifted mindsets to “energy pragmatism”, meaning the transition to renewables will be a leading investment trend in the year ahead. He goes to far as to describe it as “a mega force, a major economic trend being driven by nations representing 90% of the world’s GDP.”

It'll be interesting to watch how BlackRock walks the tightrope between the environmental activists and anti-ESG movement, but what the letter shows is how challenging communications around ESG is in a politically divided world.

Also this month, Unilever made headlines for announcing job cuts of 7,500 and plans to ditch its ice-cream business, which includes Ben & Jerry’s – known for its corporate activism. The changes are being made in a “drive to drive stronger performance” and follows years of criticism for focusing too much on purpose and not enough on investor returns. 

This marks a step-change from the times when Unilever prided itself on being a rare breed of multi-national that advocates for stakeholder capitalism; it was their previous CEO, Paul Polman, who was one of the first champions of the idea. But Unilever’s current challenges show that delivering on purpose must also maximise profit. Without profit there is no business and with no business there is no purpose. The challenge of course is ensuring that neither is disregarded and that the commitment to delivering profit, having a purpose and respecting planet and people are genuine and effectively communicated.