It's no surprise that BlackRock executives this year are careful around ESG language. Unlike in prior years, Mr. Fink's annual letter issued in March didn't use the acronym ESG once in its 20 pages.
As part of BlackRock's strategy, "sustainability is at the core of what we do. That's obviously become super politicized," Mr. McCombe said.
Still, Mr. Fink's latest annual letter conspicuously avoided the acronym ESG, and climate activists seized on that as a sign BlackRock isn't committed. Meanwhile, Florida Gov. Ron DeSantis has banded together with other state officials to lobby against ESG investments in the pension funds.
"Larry's much-anticipated — and record-length — annual letter is as notable for what it did not say as what it did," said Terrence Keeley, a long-time BlackRock executive who retired and wrote a book about fixing the flaws of ESG investing.
Gone are references to net zero asset managers alliance, the Paris Accord, the Sustainability Accounting Standards Board and Task Force on Climate-Related Financial Disclosures, he noted.
"In their place are these two zingers: 'It is not the role of … BlackRock to engineer a particular outcome in the economy,' and 'It's not our place to be telling companies what to do.'"
Mr. Keeley called these "significant departures from years past. Whether they will appease BlackRock's critics without enraging loyal supporters remains to be seen."
Mr. McCombe countered by saying: "I speak for Larry and the management team, people are asking are you walking it back, the reality is as the world's largest investor we have always invested in every single sector on the planet. That's what we're pushing forward. Our job is to identify risks and stay ahead. We see a massive movement of capital toward this transition economy. Did it mean we turned our back on traditional fossil fuels? No."
Mr. McCombe reiterated that alternative energy is the future.
"This is one of the most massive shifts of capital under way. The economy is transitioning to clean energy. Texas is leading the way. They are at the forefront. They're doing it their own way. That remains one of our critical pillars. We see that with transition finance, for example, the partnership with Temasek, for infrastructure and other opportunities for investing. We're looking at natural gas pipelines. We're playing a role in all of that."
BlackRock and S$403 billion ($298 billion) Singapore investment company Temasek launched Decarbonization Partners in April 2021 to create late-stage venture capital and early growth private equity investment funds.
BlackRock has arguably been hit the hardest by the pro- vs. anti-ESG argument, facing pressure from both sides. Meanwhile, state pension funds and investment committees are realizing the difficulty of implementing any anti-ESG laws. The $10.8 billion Kentucky County Employees' Retirement System refused to divest from BlackRock over local politicians' concerns, saying doing so would violate its fiduciary duty.
In addition, Mr. McCombe said, the intersection of infrastructure and sustainability will be one of the biggest opportunities in alternative investment. He pointed to the $125 trillion of new investments needed to achieve net-zero emissions by 2050, estimated by the United Nations Framework Convention on Climate Change.
Last year, BlackRock announced Gigapower, a joint venture with one of its diversified infrastructure funds and AT&T Inc., which will provide a fiber network to customers and communities outside of AT&T's traditional service areas. The network aims to advance efforts to bridge the digital divide and help spur local economies in the communities in which Gigapower operates, a BlackRock spokesman said.
Finally, there's BlackRock's technology juggernaut — Aladdin.
Blackrock's Aladdin software offers portfolio management, trading, risk management and other tools used by clients and other rival money managers.
Last year, Aladdin revenue grew to $1.36 billion, more than doubling from $528 million in 2015.
BlackRock's technology services revenues grew to account for about 7% of total revenues last year, and could increase to 10% to 12% in several years, analysts said.
Aladdin is so widely used that one community endowment board member asked rival managers — who noted that their firms used the platform as their portfolio risk management system — why they shouldn't just choose BlackRock as its sole outsourced chief investment officer. BlackRock won the 2022 mandate for $1.1 billion in assets.