BlackRock’s Fink on Capitalism and Sustainability

Larry how much has the political backlash thank you to ESG investing head on you and BlackRock other than BDS other than being dehydrated um actually if you just reflect on blackrock's flows last year um the backlash it's public we lost about four billion dollars of flows from various States um but in long-term flows last year we we were awarded 400 billion dollars uh just last year uh in the United States our clients entrusted us with an additional 230 billion dollars so uh you tell me 4 billion out and 230 in the US on the other hand let me be clear sorry seriously we were trying to address the misconceptions uh it is it's hard because it's not it's not business anywhere they're doing it in a personal way and then the first time in my professional career um attached Me Now personal um they're trying to demonize issues um in terms of all you know we were sitting here in Europe if you do not have a lens towards decarbonization you're not going to win one one Euro of business and so um we talk about choice you know we we are one of the largest hydrocarbon if not the largest hydrocarbon investor in the world uh because of where the largest indexer and we work with all these different companies at the same time we're one of the fastest growing companies related to decarbonization and let's be clear the IRA in the United States is a game changer too and we're seeing more and more companies who are looking to partner in doing things and and our conversations in Europe we're hearing all the Europeans are looking to have a similar response so let's be clear the narrative is ugly The Narrative um is creating this huge polarization if you really read the co letters that I've written in the past I talk about um a a transition has to always be fair and just it's hard for me to lose much more hair I you know seeing trucks with a picture of me standing next to some other people that are DMI idified so um it's uh it's not look at I in when I meet our clients when I meet our clients um in Europe our clients in the Middle East in Asia when I meet our clients in red States and blue States I'm actually rewarded about the depth of our conversations today I mean I I another example of what we are doing with our clients we're winning more and more of the entire portfolios of their Pension funds than ever before and this is not this is you know we actually won the entire Pension Plan of a major hydrocarbon company a major Energy company you know if we were that enemy uh that we're being we're being accused of I don't think we would have those type of relationships with them we're working with one or two major energy companies right now on their pathway on decarbonization and so as my letters wrote we have to be working with energy companies not against I've always said we are hostile against um um divestiture divestiture it just moves from public hands to private hands and so even in the first letter when I talked about um decarbonization and climate that was in 2020 and all the things I've said are still true today unfortunately there are some politicians who are taking some sub parts of a sentence out of context and it and that's the world we live in today it doesn't make you rethink actually promoting some of those products in America no because I if you re-read what I said um a transition has to be fair and just a transition is not going to be a straight line obviously when I wrote letters I never anticipated a war I never anticipated the A disruption of a major energy producer so we have all those issues but no I I in winning 400 billion dollars a long-term flow from our clients I think that is telling you that our voice is still though is even more resonating with our clients than ever before and and and you know 99 of our clients flows are private flows the few that have wanted to make it a political statement uh I I could promise you we treat every client individually I think we have one more business because her long-term performance the guidance we give with Phil and bii does in terms of giving people a better understanding what we think GC in the world and our fiduciary standards that an individual client level to everyone is as strong as anything what's your relationship like what's like we are doing everything we can to try to change the narrative let me just leave it at that so so you've met with him I'm not going to go into who I meet and who I talk to especially not not not with his audience well I did write a letter in November on on voting choice uh so I did have a letter on voting choice in November which was very well received and other other people in the journalistic field said no firm is doing more to democratization vote than BlackRock uh and I think that's true no firm is trying to bring back the vote to the individual asset owners we're not an asset owner we're the asset advisor uh and then um uh a a letter is coming out sometime this quarter yes I'm not going to get a good word of the of the moment that I'm really using and I'm using it here um for a better economy the whole concept of Hope a covid um has really changed how we think the fear of mortality it has was developing the world um the polarization the politics a war if you look at birth rates in the world they're collapsing in the developed world I mean you do bring a child in the world unless you believe tomorrow is better than today if you look at the savings rates in the world the savings rates have mounted up dramatically in the world um BlackRock is a firm that tries to sell hope because why would anybody put something into a 30-year obligation unless you believe something is better in 30 years um and say you know more and more money has been held in China alone there is estimated 2.7 trillion dollars of more Savings in the system if it's you know it's in the hot the savings rates in China are in the high 40s people are not investing in the future they don't have that they don't have the safety nets of Health Care and and retirement and and so we're losing hope and the polarization of Politics the you know with which media Source do I even believe in Bloomberg okay fine yeah you need to get that out no but but Francine more and more people are frightened of of the realities of today and that's manifesting in so many areas and so that's going to be a major thing and I talk about that a lot today if you look at how how do you see that person that's you know when I talk about hope I'm not talking about you know whether the markets are up or down in the next 12 months I mean standards of living pardon me but standard Olympians have to grow obviously wages and we're seeing that and people have to feel more comfortable and I'm not just talking about a phenomenon in in Western Europe or or the North America I'm talking about the world and and um and there's less hope in the world today do you see the world getting better so economically sure look at you know last year was a year of transition in so many ways I mean obviously the first time in 40 years and this impacted Blackrock in our earnings that I reported on Friday we had um bond market down 13 Global Equity markets down 18 and then for us the dollar appreciated dramatically but if you just if you were on a desert island for all last year and you had a pool of money today you have greater abilities to invest today than you did a year ago and two years ago um if you look at a a normal retirement portfolio this is something that we don't spend enough time on a typical retirement portfolio in in around two thousand two three you could own 40 to 60 percent in bonds and earned your your your your your return of seven and seven days and eight in eight by 2020 you could not own a bond I mean so you had to take so much illiquid risk I mean think about the growth in privates and private Equity why because you could not make a return in bonds today with you know you could get four percent in the short-term treasury you get five percent in credit eight percent you could now go back and have a I would say a a better portfolio a better asset allocation today than three years ago you could reformulate it and and bring down your illiquidity risk and the question that we all have to ask is investors do you believe we're going to have more liquidity in five years than we do now I don't think so I think we're not going to have the support of federal reserve for years to come or central banks we saw the limits of fiscal stimulus in the UK and every other government is now facing that and so the reality is we are going to have less liquidity right and it has to be market-based liquidity so how much illiquity do you do you want if you're running a retirement plan and so the big issue is is bonds play a bigger role today than they did in the last seven eight years where do you put your money in the next 12 months I've had a portfolio in equities my whole life or some form of equity related assets I'm you know even at my age I'm not changing that view uh so I you know I don't allow Market markets like today let's getting back to PSPs are more realistic today than they were two years ago I could go on and on and on we're spending so much time focusing on the tragedy or the the recalibration of last year but the reality is um there are better valuations in companies today than there were two years ago uh you can earn a better return in bonds than you did two years ago and so we're festering on what happened last year and all the travails we're talking about oh gosh is inflation going to be you know how fast is going to fall let me be clear inflation is falling the questions can it fall to the to the to a two percent rate which I question it will I don't even know why we have a two percent Target that's a you know I've raised that question many times could inflation bring be brought down to three three and a half absolutely now does that mean the central banks are going to keep rates higher for longer maybe and that's the issue that I have related to liquidity so you think Market What markets get wrong is is there too pessimistic um I'm not here to tell you we can have another uh problem I think the world is pretty uh unstable let's be clear what moves the energy valuation is 500 000 to a million barrels you know if the if China's economy rebounds after the the uh when they when when they when the country has hurt immunity which I'm told is happening very rapidly I mean three weeks ago we had nobody in our offices there now everybody's back and I hear that from every CEO that I've met in um here in Davos uh you know it is estimated that the Chinese economy can grow five or six percent in the third and fourth quarter if that's the case does that mean are they going to demand an extra 500 000 million barrels of oil is that at the same time we're we're estimating a mild recession in Europe and in the United States is it off that offset it if not I mean the trends would say we're going to have more we're going to have elevated Energy prices again from where it is today if if that's the case what does that do in to inflation and so all I'm trying to say is I'm not here to suggest it's going to be Rosie for in 2023 but what I'm saying for long-term investing it's not so bad it's a better environment for long-term investing today than it was two years ago and that's the myth so given what you've explained our private markets less of a draw now yes um but not in infrastructure not in sustainability that's where because you're going to get much higher coupon I mean the beauty of infrastructure and and is you you know it it throws off higher income and so I think it's just going to be a recalibration to more income-oriented private illiquids uh then look but you know we do a survey every year um and the last two year surveys were at Epic Proportions about how many investors were were going to put more and more money into illiquids now they needed to because of because of the bond market um when you see that type of overwhelming statistic generally that's wrong you know the heard of The Herd mendelities never worked so um so um I I think I think you know we're still living the pain of last year but I think the opportunities in 2023 are far better than they were in the last few years I have a couple of questions from the audience so thank you so much for sending them in about liquidity suggests it will be worse uh it seems like the last 30 years liquidity has broadly improved why why do you think in five ten years it could get worse I just don't see fiscal stimulus happening anytime soon we need I I you know what I you know I don't I what I worry about most yeah it didn't ask me that question I don't worry about I don't worry about inflation as much I worry about is anemic growth over the next five to seven years I don't know how we're going to get out of this two percent growth rate and that's my bigger issue we're not going to have the fiscal abilities unless we grow to add on more fiscal stimulus and we're certainly not going to have accommodate of Central Bank behavior for the next few years so what would be your growth plan if you're in charge of a large economy uh well I do believe um look at another thing is for in the last two years certainly since the Ukraine invasion is we hear National Security coming up all the time okay we much for National Security Europe needs to have its own ships for National Security the U.S needs to build its own ship for National Security we need to have more independence of energy whether it's renewable or or uh or hydrocarbons let's be clear when we all talk about National Security and we do it all individually as as Nations that's inflationary so we're gonna you know we're going to be creating more and more redundancies ultimately that's deflationary but that's longer term so um uh I'm not that I'm not that worried that two percent is is a is a bad outcome and I think it's certainly a better outcome than the last year or so where we needed so much fiscal stimulus and monetary stimulus to get the economy going and you know if we could just without that government support that we could create an economy of two percent plus where I'm going to be wrong where we may have three or four percent growth is if we have another technological changes what role does AI play and and in terms of productivity let's be clear a major component of why we had such high inflation is no one wants to talk about productivity collapsed during remote working remote working has not worked but does aios I also job losses lawsuit well last I checked we have Labor shortages in Europe uh and in the U.S so a little combination of new technology um is probably going to be helpful unless unless uh the Europeans and Americans open up our borders for more immigration I'm not calling for that but a good example in terms of U.S policy the U.S changed our legal immigration policies we're down in the United States two and a half million legal immigrants in the last five years we've made it much more restrictive for legal immigration and I'm not talking about migrants I'm talking about paralegal immigration we've stopped that too um Larry we're almost out of time but we spoke to the well a Ukrainian official who said they hoped that BlackRock would put money in the country what can you tell us well it's public what we're doing we we've been hired by the Ukrainian government to help them build a reconstruction fund we have our whole team there tasked in in building out the team making sure we have the organizational structure in place that we're going to help them hire the right team that Ukraine will be a great place for public money to to help restore it what I told president zielinski is our job is to make sure that the opportunities for private Capital can come to Ukraine and we get in a fair unjust return he agreed on that uh he agreed on the role of capitalism in his country for that and um I told the president uh that uh our job is to make sure that uh the new Ukraine is an open Society open economy that that if they are looking for that type of capital um the capital will be there and um and we've had many dialogue with them and we'll have another dialogue with him later today

Channel: Bloomberg Live

Views: 12,247

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Id: 7A6Rus4dWHQ

Length: 18min 57sec (1137 seconds)

Published: Tue Jan 17 2023