Does ESG privilege climate action over social and governance issues? A content analysis of BlackRock CEO Larry Fink’s annual letters

Milton Friedman famously argued that the social responsibility of business is to maximize shareholder wealth. Friedman’s view is challenged by the proponents of corporate social responsibility who suggest that firms should consider the interests of all stakeholders, and not just shareholders. Following the stakeholder approach, BlackRock’s CEO Larry Fink has made the case that firms should use the ESG (environmental, social, and governance) metric to evaluate their performance as opposed to short-term profit maximization. Fink employs his annual “Dear CEO” letters as a platform to outline his views on ESG. While these letters focus on all three ESG dimensions, the media tends to portray Fink as a climate advocate. We examined the texts of the ten letters Fink has published since 2012 to assess the extent to which Fink focused on climate issues. We found that Fink emphasized the climate dimension over social and governance dimensions only in two letters (2020 and 2022), which suggests that the thrust of Fink’s letters differs from how the media frames them. Broadly, our paper suggests that norm advocates sometimes cannot fully control how their advocated norm is interpreted and framed. Limiting ESG to climate issues has implications for its business acceptability. Specifically, this framing links business incentives to adopt ESG to the policy salience of climate issues as well as the fortunes of both the fossil fuel industry and the renewable energy sector. Second, if businesses face a legitimacy crisis from governance shortfalls or inadequate social performance, ESG will serve as a less effective tool in alleviating stakeholder concerns.Author summary: How should the modern corporation integrate social, environmental, and governance concerns in its business operations, and how should it respond to the expectations of all stakeholders without privileging its shareholders? In recent years, Environment, Social, and Governance (ESG) has emerged as an important business norm to guide firms on how to incorporate social, environmental, and governance goals while pursuing their economic objectives. Larry Fink, the CEO of the world’s largest asset management company, BlackRock, is a vocal ESG advocate. Fink’s annual letters, which are widely read, frequently focus on ESG issues. However, as ESG has become embroiled in partisan debates, Larry Fink has been portrayed as a climate advocate. In this exploratory paper, we analyze the text of Larry Fink’s ten annual letters to establish the importance he attached to climate, social, and governance issues. We find that Fink’s letters emphasized the climate dimension over social and governance dimensions in only two letters. This suggests that the thrust of Fink’s letters differs from how the media frames them. The narrow reinterpretation of ESG as a climate norm potentially limits ESG’s emphasis on other social challenges such as gender and racial equity, and corporate governance.