BlackRock: More Bull on Wall Street?

it's actually more dangerous than we think. Welcome to calling bullshit the podcast about purpose washing, the gap between what companies say they stand for and what they actually do and what they would need to change to practice what they preach. I'm your host time onto you, and I've spent over a decade helping companies define what they stand for, their purpose and then help them to use that purpose

to drive transformation throughout their business. Unfortunately, at a lot of companies and organizations today, there's still a pretty wide gap between word and deed. That gap has a name. We call it bullshit. But, and this is important, we believe that bullshit is a treatable disease. So when the bullshit detector lights up, we're going to explore things that a company should do to fix it. In this episode, we're going to look at black Rock, the largest investment

management company in the world. They manage over nine trillion dollars in assets and their global influence is undeniable. In his annual letter to the heads of the smpanies, Larry Finn, black Rock CEO, has stated that their purpose is to help build a more equitable, financially resilient future, not just for their customers, but for the planet to That's an admirable and lofty goal, but is it true. That's exactly

what we're going to explore in this episode. To really understand black Rock story, we need to understand how American business has evolved over the last several decades. So we're going to go back in time, all the way back to the end of World War Two, when the US

economy began a period of rapid expansion. President Roosevelt approves legislation to provide for America's war veterans in the Peace to Come by law, federal loans, pre schooling, job insurance, and complete rehabilitation are among the benefits to short every man and woman in the The g I Bill helped a generation of returning soldiers go to college, secure good jobs,

and buy homes. The manufacturing and services sector grew, and companies were eager to sell to an expanding American middle class. How many dreams can your shape in a minute? As the people have done. There were a few other factors behind that post war economic boom. First, many business leaders believed that they had wider responsibilities to people and communities, not just their shareholders. And second, the effective tax rates on individuals and corporations were higher, which meant that all

of that wealth was being redistributed more efficiently. In the ds CEOs, we're only making about twenty times more than a typical worker, by that was three hundred and fifty times more. And back in the fifties, union membership was high and upward mobility was real for many Americans. And

then in it all came to a screeching halt. Gives me the great pro pleasure to present to you today, Professor Milton Friedman, the world renowned economist Milton Friedman, published an essay in The New York Times that had a colossal impact on American business. He introduced the concept of neoliberalism that rejected the idea that companies should have a

social conscience. In Ohio, an old man failed to pay his electric billity you may be familiar with the case, and the electric company turned off the electricity and he died. Who was respons Let's suppose that the electric company or to follow the practice of never turning off anybody's electricity.

Who would pay the costs? The responsibility really lies not on the electric company for turning it off, but on those of this man's neighbors and friends and associates who are not charitable enough to enable him as an individual to make the electric bill. Friedman believed that a business had only one social responsibility to make money or its shareholders. To him, an executive that wanted their company to eliminate discrimination or avoid pollution was and I quote, preaching pure

unadulterated socialism. Humanist capitalism, which said you had responsibilities to your workers and your community was out predatory capitalism. The dog eat dog short term approach to success was in the point is, ladies and gentlemen, that greed is good. In pursuit of ever larger profits, corporate leaders began to hack away at internal costs. Greed is right, Greed works paying the lowest possible wages, providing less training, less paid time off, or none at all. Greed clarifies cuts through

and captions es of the evolutionary spirit. But the really bad behavior happened at the regulatory level. Corporations lobbied relentlessly to lower the corporate tax rate and weaken environmental protections, which is why humans are now facing the existential crisis of climate change. Okay, so where does black Rock fit into all of this? More precisely, where does black Rock

CEO Larry Fink fit into all of this? Back in the height of the predatory capitalism days of the late nineteen eighties, Larry and seven other finance executives had an idea to create a risk reduced asset management company, or in plain English, a safer place for rich people and big institutions to park and grow their money. At first, pursuing Freedman's doctrine, black Rock just wanted to get as big as possible, and they did, eventually becoming the largest

investment manager in the world. But then Larry Fink did something really freaking bizarre. He started talking about the responsibilities that business has had to help solve the big issues in the world. He was advocating that businesses become purpose led, an idea that was seemingly at odds with Freedman's philosophy

that had taken the Western world by storm. Back in ninety seventy, black Rock chairman and CEO Larry Fink sending a letter to the CEOs of the SMP five companies, warning them not only about activism and short termism, but also calling on them to focus more on long term growth. And when Larry talks, CEOs listen. And suddenly he was saying stuff that would make Milton Friedman sit up in his grave. We are interested in long term results, not

short term results. Larry started talking about the need for companies to take care of stakeholders and not just shareholders, and he began hammering c e o s to take a role in actively addressing climate change. Big news from black Rock this morning, the world's largest asset manager now announcing the firm will make investment decisions with environmental sustainability

at its core. And finally, in Larry led a coalition of CEOs of nearly two hundred of the world's largest corporations called the Business Roundtable, to publish a letter redefining the true purpose of a corporation. You've effectively suggested that it's not just profit that you're after as an investor, but that to get to that profit, you think that these companies need to have a social purpose, which is a little bit stepping out. Well, no, I don't think

it's stepping out. I think I'm actually reconfirming what Milton Friedman said. If you read his whole essay that everyone talks about, he talks about that you need to be connected in your community. I believe the companies that have purpose are the best companies in the world because it unites their employees, it connects the clients, it brings the organization onto a common plane. Look, I love that Larry think is saying this stuff and putting videos like this

on the black Rock website. We contribute to a more inclusive and resilient economy that benefits more people. This is how we remain true to our purpose of helping more and more people experienced financial well being. But what we need to get to the bottom of is does he really mean it or is it just a bunch of bs. So let's start digging for more context on how investors and investment managers like black Rock can push companies to

clean up their act. I called up Andrew Behar. He's the CEO of a nonprofit called As You Sow, which supports shareholder advocacy. That's s ow, like the proverb as you sow, so show you reap. He's also written a book called The Shareholders Action Guide, Unleash Your Hidden Powers to Hold Corporations Accountable. Andrew, thank you so much for

being here. My pleasure. We're here to talk about black Rock, but having read your book, I wanted to start out today talking about the work you're doing at As You Sell Sure. So as You Say is at a five O one C three nonprofit. We're found when you focus on corporate accountability from the viewpoint of shareholders. So we engage major companies generally SMPI companies as shareholders and we bring to them a message around really around material risk

and as shareholders we want to see them improve. We're advocating on behalf of the company creating more environmental, social and governance policies and practices. So can you talk a little bit more about how shareholder advocacy works, like what the primary mechanism is SURE So the SEC has a rule called fourteen A eight, which says that shareholders that have a certain amount of shares for a certain amount of time have legal standing to ask the companies certain things.

For example, as shareholders, as you so, approached Young Brands, the parent company of Taco Bell, Long John Silver's, and Pizza Hut, to advocate for the reduction of plastic in their restaurants that ultimately ended up in the ocean. So we went to the company and said, our brand, Young Brands is being associated with the destruction of the ocean ecosystem, and we have a solution. It's a really very simple solution that's going to actually cost us a lot less

than this negative brand association. And we suggested this and the companies they said, okay, well think about it. We escalated, We filed the shareholder resolution. If you're not familiar with that term. A shareholder resolution is a document a shareholder can file six months before a company's annual meeting, which

is then put to a vote. There's a whereas clause which says, whereas the company continues to use styrofoam, and the styrofoam is finding its way into the ocean, and it's causing this destruction, whereas we have all this evidence and there's footnotes about what this destruction is doing. Therefore, it's resolved that the company will write a report about how this plastic use is impacting the ocean and potentially having a negative impact to our brand, which is a

material issue for shareholders. These resolutions for change can be a big pain in the butt for companies like young brands, so there's a real incentive to settle the issue before a vote. So then what happens is the company then has a conversation with you and they say we'd like you to withdraw, and you say, well, we'll withdraw if

you will pledge to change this practice. And sometimes the company says okay, and sometimes they say no. And if they say no, you talk to press about it, You talk to other investors about it to get a better

understanding of the potential impact to the shareholder. Advocacy can have in one alone, as you so met with a hundred and eighty eight companies to discuss pressing global issues climate change, ocean plastics, toxins and the food system, antibiotics and meet racial justice, diversity, equity, inclusion, egregious CEO pay all these different issues, and one point seven trillion dollars of assets were voted yes. And as you so, resolutions right.

And one of the things that you pointed out in your book was that there was a time when it was pretty rare for shareholder resolutions to even get ten percent of the vote. Today you said that they routinely get twenty thirty even of the vote. So it seems like this is picking up momentum. Would that be accurate? The institutional share owners are voting much more frequently and also much more for the resolutions and against management than ever before. It kind of leads us into the a

black Rock conversation. Just this year, black Rock increased from a sevent voting against management to So when black Rock flexes, its power really ripples through the system. And the question I always have is why don't you use it more often? Like, for instance, Larry Fink's letters points out that there is every company should have a climate transition plan that is aligned with Paris that is a five percent emissions reduction

every year for the next ten years. I mean, he puts it in his letter, but then he stopped short and never says or will vote against your board or will drop you from our managed funds. If he did that, every company would have a Paris compliant transition plan overnight. But why should any other CEO listen to what Larry Fink has to say? What's special about Larry Fink? They owned about seven to twelve percent of every company. Uh. In case he didn't catch that, Andrew just said black

Rock owns a out seven of every company. He also goes on to say that historically black Rock doesn't share what they learn with other shareholder advocates. So on the one hand, it seems like there's problematic behavior on black Rock's part from a shareholder advocacy standpoint. On the other hand, there's also some good behavior, specifically what Larry Fink is

addressing in his letters. And I've read his letters going back to and I guess it's a fascinating read to read them in sequence, because it feels like you're watching the progression of Larry Fink's thinking. He starts out talking mostly about the need for ceo s to make the mental shift from thinking quarter to quarter to thinking longer term, and that struck me as in itself a pretty unusual stance for someone in finance. Would you call that accurate,

people truly understand finance, and they acknowledge that. They acknowledge that it's true that really this whole idea of short termism is an antiquated myth that needs to be overturned. And when Larry Think says it, well, there's a lot of gravitasks behind when he puts it in a letter.

So hopefully that's starting to sink in that actually what investors want to invest in his companies who disclose honestly, tell us exactly where you are, layout a trajectory for where you want to go, and then tell us as you're hitting your six month, one year to year milestones, and if you don't hit your milestones, tell us what course corrections you're gonna make. Investors will reward that we're tossing out Milton Freedom. Uncle Milton's going under the bus.

It's a total philosophical shift of what a corporations for now. What's happened since then is everybody's calling it grainwashing, and I disagree. It's a philosophical shift that's going to take some time to implement. And I believe that there we're seeing is the actual emergence of a new economy, A regenerative economy based on justice and sustainability, that's replacing our

current economy that's based on extraction and destruction. We're right at this inflection point, right now, this minute, and that's why people feel so much turbulence. They don't quite know what to do with it. It's because we're just in this birthing cycle and birth or messy. You actually wrote a I found incredibly smart and very entertaining letter as a response to Larry Fink's letters to c E O S. Could you talk a little bit about what you said

in that letter and why you said it? Sure, so you know, I read his letters, and I in my mind, I think if only Larry had sent this to me before he published it, I would have marked it up for him and he would do much better. So I took his letter. I literally put it into word. I did exactly what I would have done if Larry had said, Hey, Andy,

can you mark this up for me? I finished the sentences when he says companies should have a climate transition plan, to report against it every year and have emission reduction by I added, or we'll vote against your board and if you don't get it done. In a year, we'll remove you from our managed funds. Right. I just concluded his sentences by adding action. I thought he brilliantly laid out the problem, and so I just helped him a

little bit. Oh, I thought it was great, Andrew. We have a thing on calling bullshit called the BS scale, So on a scale of zero to one, zero being zero bullshit, which means the company means everything it says, and on being just complete BS. Where would you rate Black Rock getting better? Larry's letters have been instrumental in just awareness that climate change is this investing risk to the entire system. They've been instrumental in actually this whole

idea of stakeholder capitalism. So I have to commend him for what he's done. My problem is he didn't finish the sentence with or we're going to vote against your board. And if he did that, if he said and we're going to use our power, then I would give him square a zero. That's what we need. So I don't have an exact number for you, but I'd say it's a work in process, and they could do a lot more, and they have the power to really make incredible change.

So what is the one thing Andrew that Black Rock needs to do or change to better align its actions with the purpose that Larry is talking about. They need to stand with the other shareholders, stand with entire shareholder advocacy community. Two vote with us. We spent a lot of time and energy on this, and yet generally black Rock says, well, we met with the company and we're cool. Trust the shareholder advacy community support us. That would be a shift in where we're heading and the speed at

which we could get there. Andrew, thank you so much for being here today. Thank you very much. Folks. It is time to make the call. Is black Rock really taking action to contribute to a more equitable, financially resilient future for all? Based on what I've heard so far, I'm calling a qualified bs. I think there's some bullshit here, but there are also some really positive signs. So what

should Larry do now? Up next, we'll hear some solutions from some experts in in packed investing, including a black Rock insider and whistle blower. All Right, before the break, I called a qualified bullshit. There's still a gap between what Larry think is saying Black Rock stands for and the actions they're taking. So what should Larry and his leadership team do about that. In this podcast, we don't just curse the darkness. We also like to light a

few candles. So I've invited to impact investing experts to propose some concrete things that black Rock could change to actually do their story around sustainable investing. First up, I'd

like to welcome Matthew weatherly White. Matthew is a co founder and former managing director of the cap Rock Group, a multi family office based in Boise, Idaho, advising over three billion dollars, roughly a third of which has been deployed with an eye toward impact investing, which they define as pursuing positive financial return while simultaneously creating durable, measurable social and environmental value. Welcome Matthew. It's great to have

you here. Thanks for asking me to join this conversation. I'm totally excited. We are also joined by Tarik Fancy. Tarik has held multiple positions in finance at firms like Credit Suites, First Boston, MHR Fund Management, and the Canada Pension Plan Investment Board, and in seventeen, Tarik joined black Rock, where he was the Chief Investment Officer for Sustainable Investing. I actually loved that he has this in his bio,

so I'm just gonna read it. After trying to make Wall Street more green from the inside, he realized that there was no real social impact happening, rather just a bunch of marketing tak Thank you so much for joining us today. Glad to be here. Okay, so let's get right into some ideas for black Rock. Matthew in two minutes or less. What's the number one thing black Rock should do to better do their story? I think that

you teetered up beautifully. There's this gap between what Larry Think is saying very publicly in his annual letters and what black Rock appears to be doing, and that really begs the question. Is that gap structural, institutional, or operational? And I think it's a little bit of all three. Right. If I were already think, I would do one really

simple thing. I would change the new client form to require investors to opt out sustainable and impact investing and instead opt in, because I think if you make it that explicit, rather than forcing people to opt into a more inclusive, regenerative, equitable style of investing, if insaid, you make people opt doubt, I think the proportion of people who would choose to opt in to that sort of the negative shadow world of investing, which is now the

ubiquitous approach. Right, everybody does that because everybody is being asked to opt into sustainable impact investing. I think the messaging alone would give Larry Fink so much power, so much sort of political capital to force change within the organization that that institutional operational hesitation slash resistance slash intractability. I think it would sort of collapse by on its

own weight. When you look at organ donation for example, and the percentage of people that opt into organisation donation versus opt out of organization. It depends entirely upon how the form is structured. And if you have to opt in, it's like the people who are signing it opt into how the organs donated. But if you make them opt out, it's like eight. So just change the default setting. Essentially, it's one of those really simple, really deceptive them guessing

that teople will say totally not possible. But I feel like there's one thing I would do. Yeah, No, I think that's a super cool idea. Reframe the whole conversation. Matthew. That was great, Thank you, Okay, Taric, your turn in two minutes or less. What's your idea to get black Rocks actions better aligned with their stated purpose? Well, I mean, I obviously know black Rock from the inside. I know Larry personally and worked firm, and I think he's extremely

intelligent and talented. What I think he should do is actually be honest about the limitations of what business and financial markets can do without government regulation. And what do I mean by that. I don't think that the financial markets right now are structured in any kind of way where they can address the climate threat because people are still able to pollute and they don't pay the cost

of that pollution. The biggest issues surround the fact that the entire system is structured to chase yield and profitability. That's not just black Rock, that's every single firm, including all the ones up worked at. And that's not a bad thing. I'm not disparaging it. I'm being realistic about a system that has been built with a chain of legal and financial obligations that Larry himself can't intervene in,

and they're all around chasing profit. I think the most important thing you can do is actually look and say, listen, you know, we business leaders will lead as much as we can, but we need referees. Just like a competitive sports game has competition and there are rules and people compete on a playing field. Well, right now, the idea that I think that the players will figure it out all on their own through good sportsmanship is the idea he's peddling, and I think it's ridiculous, to be honest,

and I think that's burning valuable time. We clearly need updated rules and referees for capitalism, and I worry that instead of doing that, we're beholden to a set of neoliberal theses that emerge in the eighties and have convinced us that we don't need regulation, that the free market will figure it all out, and that is to a large extent, would impact investing in E. S G is all about. These are all based on free market self

correct theories. And I think that the sooner he accepts that we don't have time for that and the expert they're telling us we need stomach reforms, the faster we can actually create some real change. Right. I love that idea. Also, thank you, Tarik. So it's my turn, and you know I approach this with some trepidation because you guys are the experts here. But my perspective is that black Rock

has done two important things. The first is the act of actually publishing the letters that call for CEOs to think longer term, to become purpose led to tackle specific

problems like climate change. The second important thing that black Rock has done is getting members of the Business round Table, which for our listeners is two CEOs from the world's largest corporations, to basically publicly say that Milton Friedman was wrong and that the purpose of a corporation has to change from you know, merely enriching shareholders to seeing to

the needs of broader stakeholders. And I think the issue right now is that nobody knows what to do next, and so Larry Fink, having started this conversation, now needs

to lead it into action. And from my perspective, that means using black Rocks money as a hammer to create change, forcing fund managers to get transparent about where they're invested, for instance, and I think it means making sure that the entire financial industry has a set of measurements that are adopted as the final answer fore s G investments.

I think black Rock needs to lead this, and in a way, I think they need to designate themselves as sheriff and actually start policing some of those metrics, calling folks out who don't measure up, calling some out who do measure up, and probably most importantly, calling themselves out when black Rock itself doesn't measure up. I think that would go a long way toward building trust. Can I jump in and disagree with that? Of course, yes, please. I think that the worst thing possible for society is

that black Rock place sheriff. Why is that? Because? I mean, how would it have worked if we allowed in the subprime crisis and the financial crisis, you know, ten fifteen years ago, if we had said, hey, let's let the financial banks and all be their own sheriff's. We tried that.

It's called self regulation. It doesn't work because when their incentives, which are extraordinarily short term, right, their focus towards the next few years and their bonuses, when those incentives don't align with the long term public interest, for example, for long term sustainability issues, you can be sure that a system like that, it's going to put the capital where their incentives are and not where we needed to go

as a society. A hundred years ago, an economist called Arthur Pigou started coming up with the theory of externalities, and the idea was that if you're creating private profit in a way that hurts the public interest, you have to pay the cost of it. In other words, you're polluting, you have to pay a tax for that pollution or

fine or something. That is what changes in too that's a market based mechanism because now you just fix the rules of the game, the players within that compete to score as many points or profits as they can within a new paradigm. Well, okay, I hear that, Turk, and I just want to clarify because I'm not saying that black Rock should be able to regulate the entire industry.

What I am saying is that the industry needs a set of metrics that everyone is aligned on to define what is meant by E s G. Investing and what the metrics are that the industry is going to align on. And if black Rock took leadership in developing those metrics and then policed those metrics, they would be seen to be truly leading the action that needs to happen, as opposed to saying it but not doing really anything about it.

That's a fair point. The only thing I'd say, though, is that the issue isn't that Larry can do a whole bunch of things to address climate change, but he's not. The issue is that he can't do that, and he's saying he can. That's the issue. What I saw inside the system was that all the portfolio managers and capital allocators are doing exactly what they should be doing. They're

chasing the highest yield, they're chasing the most profitability. They should be doing that because that's not Larry Finks money. The Night and a Half trailing the Black Rock manages is on behalf of clients, most of his retirement money from average people, and so that money he can't do what he wants with it. That has to be invested to maximize return measured in dollar value, not social values. That's a legal construct. It's the idea of fiduciary duty.

There's no choice they have around that. Is there evidence that says by incorporating environmental or social consequences, we are by definition generating below market returns. I can tell you, as a trained investor who was integrating environmental and social considerations into the largest pool of assets and capitalism that generally speaking, the idea that E s G is beneficial to returns is for the most part of fantasy. Let

me give you an example, because this happened. I'm a portfolio manager and I have to allocate capital and it could be to renewable power, or it could be to fossil fuels. Now absent to carbon tax, and we know no Belt Prizewinn in conference telling us we need a carbon it. We need something to correct the market failure. Absent that the portfolio managers going to invest more in fossil fuels and we need for them to write so

we need a carbon tax. What Larry's out there saying is, which sounds similar to the sort of the broader thesis, is that E s G is good and if you have the right tools and you have the right data, then you're going to do the right thing and invest

in it. And what I'm telling you is that when it's more profitable for companies underpaid their workers to not invest in renewable power, to not make long term sustainability investments, and you have the executives who's going to top that system with very short term incentives they're not paid to care about long term issues. They're just not going to do it. It's not because they're bad people, it's because the system is not built for them to do it.

So they can consider E s G. But the issue is the E s G thesis at its course, as E s G is good for returns, which is financial jargon proxy for saying being a good responsible company is better for your profits. The problem is that's not true. If the E s G data tells you that you should invest in a company that's less responsible, they'll do that because their produceries they have to do that. Think of that sports analogy, right, You're on the field to

score as many points as you can. Now what we're figured out is a dirty play actually scores more points. You raise Milton Freeman, Right, We talked about Milton Freemen all the time. He wrote in a free Enterprise Private property system. In corporate executive is an employee the owners of the business. So to your point, the FU share responsibility comes in from that regard, etcetera. He has direct

responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible. And here's where it gets interesting. While conforming to the basic rules of the society, both those embodied in law and those embodied

in ethical custom. And I think that that little phrase like it undermines so much of what we say Milton Friedman said, because to your point earlier, if the government changes the rules, imposes a carbon tax, enforces gender parity in c suite, like, whatever the rule is, capitalism will adapt and reflect that immediately. That's what capitalism does really, really well. But to say that in the absence to that it's not designed to do it, I totally call

bullshit on that. I think capitalism is an extraordinary optimization mechanism. So you're saying that the market will self correct itself on climate change, because that's effectively what we're saying, because otherwise you need a rule change. No. No, I'm saying that the market will reflect given the conformance the basic rules to society, goes in bettered and law on those

in bettered and ethical custom. And that's why I think that opt out idea is interesting, because the ethical custom has no way of expressing itself in the markets right now. There is no way for the general public to say, hey, we think that corporations should be thinking more about climate change absence selling some shares with you know whatever. That

so they're not gonna work. But if there was this way to message the ethical custom and back it up with the standards embodied in law, suddenly I think Wall

Street changes on a dime. I think that Harry. For you to say that that Larry thinks sort of can't act in accordance with his values or his stated objectives in his letters because the regulatory framework doesn't let him, I think that is effectively inviting regulation or is writing reregulations or something, because it seems like I really want to do this, but I can't. Therefore I need government to act so that I can do this. I don't know if he's saying that, but that's sort of the

framework that I hear. He's not saying that, but I mean that's what even portfolio managers are told me. So their point was, listen, I'll reduce my carbon footprint if someone puts the tax on carbon. Everyone will, even if you don't believe in climate change. But asking them to voluntarily do it when the reality of the economics is that it's actually profitable for them to do things we don't want them to do, as society just doesn't work.

It's not because they're bad people, because the system is built according to incentives and legal obligations and they're not set up to give us outcomes that we need. What's wrong with the idea though, of black Rock getting on offense and spearheading a drive to change government regulation here so he could say, listen, our experts and society tell us we need systemic reforms, So they're going to have to come through government because that's the only way we'll

flatten the curve fast enough. And you know what we're gonna do is both come out and say that, which he hasn't done. And again if he doesn't say that, it misleads the public, and number two say hey, we're gonna start using our lobbying efforts to actually say who we need a price on carbon. If he did that, I would say, hey, you know what, I think he actually wants to fight climate change. I want to pivot for just a second to a couple of other ideas.

In his letters, Larry talks about net zero as being the goal that essentially getting our carbon production to zero from producing more carbon than is absorbed to producing the same amount of carbon that the planet absorbs currently, so that net zero carbon is being added to the atmosphere. What do either of you think about net zero as a concept. The average CEO gets paid three times the worker in that industry, so that's the highest has been in decades. The average CEO also spends five years in

their role. That's the shortest it's been in decades. So what you're saying is that the average CEO gets paid a hell of a lot of money in a very short period of time in five years what they might have gotten ten or fifteen or whatever years before when

you have very short term incentives like that. And then you say, okay, the goal is net zero, by I mean, call me a skeptic, but yeah, Matthew, you did a TED talk a little while back in which you say that you believe that in the future all investing will be E S G investing. I'd love to hear you talk about where you think we are on that transition,

because it's certainly grown in popularity since you made that statement. Yes, and my optimists had goes back to what I would have Larry Phint do, right, which is really a gigantic public statement of values. When I put my pastant's hat on and say, well, if ten years ago you would you would have said to me, well, two, we're gonna have trillions of dollars pointed towards e s G. We're gonna have hundreds of billions of dollars towards pointing towards

climate resiliency. The issues of gender parity and pay equity and underrepresented minorities is all going to be sort of on the table. I would have said, holy sh it, like, well, if that's all there in ten years, we would have won. We're there, We're good. Quite to the contrary, the problems are more acute now then they were a decade ago, and so I think sort of pick up a thread that part laid down earlier. The failures are disorienting. I mean,

there's so persistent that it's dispiriting to me. So yes, I do think that eventually, particularly relative to climate resiliency, it will simply be unacceptable to make investments at some point with utter disregard to the environmental consequences and just pretended they don't exist. Like I think that will be eventually just unacceptable behavior. In much the same way that

slavery was rendered unacceptable or colonialism was rendered unacceptable. Right, and yet the time frame is so compressed right now around climate chains that I really worry whether or not the market response mechanism, blunted as it is by regulatory framework and an ethical framework on Wall Street, is even remotely able to respond in the time frame that we

needed to write. But I also I was reading an article in preparing for this discussion about an attempt to classify investment green investing essentially in the EU, and they have three classifications, but it's essentially dark green, light green, and then everything else. They were saying, in the current investing environment, everyone wants to position themselves as either light green or dark green, and because of that, it raises

the specter of just ongoing purpose washing. Absent any regulation on what is a green fund or not, there's going to be a race to the bottom, because you'd be insane not to call your fund green if everybody else is right. So the EU taxonomy does help in that sense, because at least you have some rules around what it means to be green, because otherwise it's not just funds, it's anything, right. Imagine you go to the grocery store

anything else. If there's an environmentally green product that looks nice, people will pay more fur it and prefer it. But the challenges no one's actually going and saying, but is

this detergent truly sustainable? Right? I think one of the biggest challenges in the whole attempt to taxonomyze and categorize impact is that everyone sort of competing for market share based on their own new taxonomy, and so we have these huge dispersion of frameworks and measurement systems and set to go back to tards idea that we need regulations, which it drives a lot is. I totally agree and I'm not like a huge fan of overregulating every but we it has to happen. I want to go back

to black Rock. A little bit earlier in this episode, I interviewed a guy named Andrew Behar, who is the CEO of an organization called as You So, and he pointed out that at the black Rock General shareholder meeting, he challenged Larry Fink to actually implement some of the great ideas that he talks about in his letters, and Larry's response was, we are fully implemented and that that

gave me pots. That's one of the reasons that I decided to feature black Rock is that seems like bullshit to me, right, Tark, I assume you would agree with that. I don't think it's necessarily bullshit, because this is the point I'm trying to make, is that there's limits on what he can do. You don't have a thesis to say you should do it because it's good for the world. You can't do that. You have to do it in

cheryl our interests. And if cheryl our interests is that you can make more profit in the next few years dumping chemicals in the river, and there's no reason to ever believe that anyone's going to make them pay the cost of that. There's no referee coming in saying you can't do that and you're gonna pay a fine. Then

technically is a fiduciary you should be doing that. And to your point, that's actually where the bullshit was, that he's not giving the full context around his answer, going out there and implying that you can do lots of amazing things. I realized it wasn't gonna work, and I left. This is like giving weak grass to a cancer patient. Right, it's really nicely marketed. It sounds great, but there's no

reason to think it's going to stop the cancer. And if the rest of the world doesn't know that and it's going to take him a few years to figure it out, then it's much worse because we're burning time. Right, you're giving weak grass with cancer patient, and then you can clean see clearly that the cancer patients delaying chemotherapy. Yep, I like that. Okay, gentlemen, this has been fantastic. I want to thank you both for being here today, and to wrap this discussion up, I want to ask each

of you to give black Rock a BS score. So on a scale of zero two, one being the worst total BS and zero being the best zero BS, what would you give black Rock? Matthew, why don't you start During the course of this conversation, I have to admit that my perspective has shifted. That's good, that's what we're here to do. Yeah, I'm gonna I'm gonna give Tarag a nod there, and it is a perspective has shifted

along two axes. First, I feel like my bullshit rating has gone up because what I see now is Larry Fink is actually exploiting his role as a perceived leader while knowing full well without disclosing it, that he's he can't do anything right. And so on one level, my bs meters panded Hunters right. On the other hand, I'm sort of more apathetic than I have been two structural impediments. I wasn't quite willing to give Larry Fink or the leaders at black Rock a little bit of room, a

little bit of empathy. I guess to work within the system that's simply intractable, and so I'm gonna split my score and go hundred slash like, fair enough, we'll work with that. What do you reckon? Ah? I would say that it's closer to a hundred dinners to zero. But I would also add that I don't think it's black

Rock specific, right. If it's let's say it's for black Rock, then I would argue the rest of the industry, and I mean the financial service industry and Goldman Sachs list, all of them, they're all in the same boat, right because they're all effectively saying the same things. I think we're out singled amount is by saying that you're the largest one. And if that voice is being used to pedal narratives that effectively just see your syrup to delay

the taxes and regulation that none of us want. I mean, I'm a capitalis I don't love tax in regulation. But at some point even Milton Friedman, I'm certain, would have said we need a carbon tax because he's not stupid, right, like, watch the planet get destroyed? And I would challenge them to rethink what responsible business means through the lens of

your own younger employees. Are you serving their interests? I think capitalism can solve these issues, but I also think that capitalists themselves need to debate how that comes about and not let there be one sort of version of it being peddled from a few people talk that could actually be endangering the entire system. The majority of millennials today don't believe in capitalism. That concerns me, right that

because they're all of us. That's right, that should concern everybody exactly, And I don't blame them, right unless they see a system that is producing better social and environmental outcomes and addressing the problems we have, they're going to lose faith in the system and endangers the entire metaphice Okay, fancy, Thank you so much for being here today. Really appreciate you taking the time. Thank you. I enjoyed this chat. And Matthew Weatherley White, thank you for being here today.

Really appreciate it. Really. Okay, it's time for my official bullshit score, because there seems to be some intent to change, but they definitely aren't there yet. I'm giving Black Rock a fifty nine. To weigh in with your own score, visit our website Calling Bullshit podcast dot com. We'll track their behavior over time and see if they can't bring that score down. You'll also be able to see where Black Rock ranks on bullshit compared to the other companies

we feature on this show. So, if you're running a purpose led business or you're thinking of beginning the journey of transformation to become one, here are three things that you need to take away from this episode. One. Defining a purpose is an important step, but it's the beginning, not the ending. Once you define it, it needs to drive the actions you take, both internally and externally. Two.

Those actions can take many forms. In black Rocks case, we've heard suggested actions like changing the default settings on investment recommendations to E s G. Compliant unless the client specifically opts out and actions like black Rock actually lobbying for a carbon tax or partnering with shareholder advocates like Andrew Behar to drive real change in the governance of

the companies and funds they invest in. The actions for your company would undoubtedly be different, but the point is it's the actions that make your purpose real for people. And three, Transparency is a key aspect of being purpose lad. In Larry's case, being super clear about what black Rock can and can't do is another key to building trust that he really means what he's saying. Larry, if you ever want to come on the show to discuss anything we've touched on in this episode, I want you to

know you have an open invitation. Thank you for joining us today. Andrew Bhart, Matthew Weatherly White, and Taric Fancy. You can find them all on social media. We've got all their handles on our website, Calling Bullshit Podcast dot com, and check out Andrew book The Shareholder Action Guide Unleash your hidden powers to hold corporations accountable. And if you have ideas for companies or organizations we should consider for future episodes, you can submit them on the site too.

If our stock went up with you today. Subscribe to the Calling Bullshit podcast on the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. And thanks to our production team Susie Armitage, Hannah Beal, Amanda Ginsburg, Andy Kim, d s Moss, Mikaela Reid, Leena Beck Cilison, Jeff Venton and Basil Soaper. Calling Bullshit was created by co Collective and is hosted by me Tie Montague. Thanks for listening, Ey,