BlackRock Embraces Market Realities with Uncharacteristic Board Appointment

BlackRock, a vocal proponent of what CEO Laurence D. Fink now calls “conscientious capitalism,” has added a voice from big oil to its board of directors. Is it a sign that the world’s largest asset manager is shying away from its commitment to investing based on environmental, social and governance principles, or a savvy approach to addressing the new realities of a transitioning energy industry?

Critics pounced on BlackRock’s appointment of Amin Nasser, CEO of the Saudi Arabian Oil Company (Aramco), to the investment firm’s board, claiming the move contradicts its well-publicized support of investing in climate-friendly companies. Some charged that Nasser’s presence on the board would “blur” BlackRock’s image on ESG initiatives by forming close ties with Aramco and the fossil-fuel industry.

Notably, New York City Comptroller Brad Lander blasted the decision, accusing the firm’s directors of being “climate-conflicted.” Lander has previously voiced his displeasure with BlackRock, implying that the company’s resolve in support of ESG was wilting as it tried to placate right-wing critics. (Fink’s recent comments about ESG turning into a political flashpoint have only fueled skepticism among environmental activists about his dedication to the cause.)

In a July 17 statement, BlackRock said Nasser’s appointment will provide a “continuity of regional expertise” on the board and “reflects the importance of the Middle East to the firm’s long-term strategy.” Fink stressed that Nasser’s value to the board involves much more than just knowledge of the Middle East region. Instead, Nasser’s understanding of energy markets on a global scale and the evolution of the low carbon economy will “contribute meaningfully to the BlackRock board dialogue,” according to Fink.

For his part, Nasser has directed Aramco’s efforts to reach net zero emissions by 2050 and led the company’s record-large initial public offering. But he has argued that alternatives to fossil fuels “are not ready to shoulder a heavy load of the growing energy demand and therefore we need to work in parallel until alternatives are ready.” Additionally, Nasser has pushed back on the rising emphasis on ESG metrics in investment allocations, maintaining the trend threatens the stability of global energy security.

On a larger scale, the controversy over Nasser’s relationship with BlackRock fits with the tensions inherent in the transition to a global economy that runs on clean energy. Even the most environmentally conscious populations are learning about the harsh realities of trying to quit fossil fuels.

Rather than symbolizing a betrayal of BlackRock’s principles, Nasser’s appointment seems more like a natural move necessary to keep the oil industry on track towards integrating sensible measures to cut carbon emissions. As BlackRock pointed out in a previous statement on sustainability: “The success of these companies will be critical to the global economy, the world’s low carbon ambitions and our clients’ long-term financial goals.”