(Yahoo! Finance) - BlackRock (BLK) CEO Larry Fink reiterated his firm's commitment to invest in oil and gas companies days after a giant Texas retirement system pulled $8.5 billion from the money manager for allegedly engaging in a "boycott" of the fossil fuel industry.
BlackRock, Fink wrote in his annual shareholder letter released Tuesday, "has never supported divesting from traditional energy firms" and currently has more than $300 billion invested in such companies.
"We invest in these energy companies for one simple reason: It’s our clients’ money," Fink said. "If they want to invest in hydrocarbons, we give them every opportunity to do it."
The defense of BlackRock’s energy investments echoes Fink's statements in recent years but also follows a surprise decision last week from a Texas fund that manages money for the state’s public schools to withdraw $8.5 billion that BlackRock had been managing.
The reason, according to a statement from the chairman of the Texas State Board of Education, was compliance with a 2021 Texas law that prohibits investments in companies that "boycott energy companies."
That official, Aaron Kinsey, also said that BlackRock’s "dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil & gas economy."
Fink did not address that dustup directly in his letter, and it's unlikely to offer a major financial hit at his company, which has about $10 trillion under management, but Fink argued for a more nuanced view of how BlackRock deploys its money.
"The energy market isn’t divided the way some people think, with a hard split between oil & gas producers on one side and new clean power and climate tech firms on the other," he said. "Many companies, like Occidental, do both, which is a major reason BlackRock has never supported divesting from traditional energy firms."
He also discussed energy challenges in Texas — the site of a major power crisis in February 2021 — that he said aren't going away.
"The state could continue to suffer devastating brownouts" unless Texas continued to look at an array of energy sources like natural gas, he wrote, pointing out that Texas currently runs on 28% renewable energy, higher than the US's percentage of renewable energy generation as a whole.
Energy and energy infrastructure overall is where Fink sees the "greatest demand for new investment" in the years ahead. The CEO spearheaded a $12.5 billion deal earlier this year to buy private equity firm Global Infrastructure Partners and increase his company's focus there.
Tuesday's annual letter was also heavily focused on retirement issues. He outlined what he sees as a coming retirement crisis driven by people living longer as well as a fraying government safety net. He says it is akin in scale to the 2008 mortgage crisis and other landmarks of recent economic history.
Fink steered away from taking on 2024 politics directly in his letter. President Joe Biden's name only appeared once. It was a brief mention of the president's infrastructure law as part of an argument that more private investment would be needed. Presumptive GOP nominee Donald Trump didn't come up once.
And the politically contentious acronym ESG — which stands for investments based on environmental, social, and governance principles — also didn't appear. Fink vowed not to say term last year, arguing it had become "weaponized."
Energy that 'has become more contentious' in the US
But even if ESG was absent, climate change and the world's array of energy issues were the focus of much of Fink's Tuesday missive.
The commentary came after Fink tried to broker a truce of sorts earlier this year between the company and conservative states like Texas, which have been wary of him after years where he had been seen as the face of that ESG movement.
It has had some initial success. Fink met with Texas Lieutenant Governor Dan Patrick earlier this year around efforts to bolster the state’s energy grid. The conservative politician was notably warm, reportedly saying that they hit it off and calling Fink the "king of Wall Street."
But it remains to be seen if that chummy relationship can overcome the larger political divide. Texas's decision to drop BlackRock from the state's fund for schools appears to have been driven by Kinsey, the chair of the Texas State Board of Education.
Fink, in his letter, said leaders from around the world were clamoring to access his sizable private funds for energy projects exactly like those whose future is unclear in Texas.
"The issue has become more contentious in the U.S. But outside that debate, much is still the same," he said, noting that investments are still flowing heavily in decarbonization, especially in places like Europe.
An equal focus on a retirement 'crisis'
Fink also devoted considerable space in his annual letter to the issue of retirement.
"No one should have to work longer than they want to. But I do think it's a bit crazy that our anchor idea for the right retirement age — 65 years old — originates from the time of the Ottoman Empire," the 71-year-old CEO wrote.
He proposed a series of changes to the various "pillars" of retirement security, from encouraging people to save more privately to governmental changes at both the state and federal levels.
Underlying the growing need, he wrote, is the good news that people are healthier thanks in part to new pharmaceuticals like Ozempic and Wegovy, which tackle diabetes and obesity.
"As a society, we focus a tremendous amount of energy on helping people live longer lives. But not even a fraction of that effort is spent helping people afford those extra years," he wrote, announcing that the company would launch new partnerships and initiatives in the months ahead to tackle aspects of the issue.
On Social Security, Fink didn't dive deeply into a growing 2024 campaign trail issue of what to do about the program, with Democrats leaning toward tax increases and Republicans floating benefit cuts ahead of insolvency in about a decade's time.
But Fink did take time to encourage US states to become "laboratories of retirement" and put forth more plans for their own citizens.
He said it will take a massive effort in the years ahead from business leaders and the government at all levels to tackle a system that is "under immense strain."
By Ben Werschkul - Washington Correspondent
