ESG and climate change take the backseat for infrastructure + energy pragmatism in Larry Fink’s letter

Finance will be “key to addressing two of the mid-21st century’s biggest economic challenges,” BlackRock boss Larry Fink writes in his annual letter to shareholders, zeroing in on infrastructure in general (and energy infrastructure in particular) and how to pay for retirement when a growing percentage of the world’s population is aging.

Why it matters #1: Fink co-founded and leads a business that he’s grown from an eight-person shop into the world’s largest asset manager. His writing is cogent and he has consistently put a ton of effort into making his annual letter to shareholders into exercises in strategic thinking. He’s not just his generation’s Warren Buffett, in that sense — his notes are now scrutinized at least as carefully as the Oracle of Omaha’s were back at the height of his influence.

Why it matters #2: Fink’s past letters made climate change and “stakeholder capitalism” (as it is now trendy to call ESG investing) mainstream topics on Planet Finance.

What’s in it for folks who live, do business, or invest in our part of the world? The infrastructure piece, right now. And the retirement issue, too — if we’re smart. (More on the retirement bit in another Planet Finance column to come.)

On infrastructure: Fink argues that “as countries decarbonize and digitize their economies, they’re supercharging demand for all sorts of infrastructure, from telecom networks to new ways to generate power. In fact, in my nearly 50 years in finance, I’ve never seen more demand for energy infrastructure.”

Citing trips to nearly 20 countries worldwide, he writes that countries “have twin aims: They want to transition to lower-carbon sources of power while also achieving energy security.”

His solution will sound awfully familiar if you live in Egypt, Saudi Arabia, or the UAE: “The future of infrastructure is public-private partnership,” he writes, and the adoption of an “energy pragmatism” approach — embrace renewables, yes, but don’t abandon the fossil fuels we need to cool our homes and grow our economies until the moment is right.

BlackRock is a big investor in both renewable energy and hydrocarbon companies, and Fink knows that pragmatism will expose him to arrows from both sides. His argument that energy pragmatism is real “path to decarbonization” will ring true to Saudi ears — and to folks in Germany and Texas, which he cites as examples of the policy in action.

Putting his money where his mouth is: BlackRock said in January that it was going after the USD 1 tn infrastructure market by acquiring Global Infrastructure Partners to create a “world-leading infrastructure private markets investment platform.”

Read for yourself: Fink’s letter is online here.

Read what others are saying: Financial Times | Wall Street Journal | New York Times | Business Insider

THE MARKETS THIS MORNING-

Asian markets are mostly in the red this morning, with just the Nikkei bucking the trend. US stock futures are edging higher after the S&P 500 recorded its third straight day of losses, suggesting there’s a chance it will break into the green today. Futures for major European benchmarks trended mostly lower overnight.

THE CLOSING BELL-

The DFM fell 0.8% yesterday on turnover of AED 503.6 mn. The index is up 4.6% YTD.

In the green: Islamic Arab Ins. Company (+4.4%), Amanat Holdings (+3.8%), and GFH Financial Group (+3.7).

In the red: BHM Capital Financial Services (-10.0%), Commercial Bank of Dubai (-4.5%) and Ithmaar Holding (-4.0%).

Over on the ADX, the index stayed flat, trading on turnover of AED 956.8 mn. Meanwhile, Nasdaq Dubai closed down 0.6%.

CORPORATE ACTIONS-

Umm Al Qaiwain General Investments has approved a dividend payout of AED 21.8 mn for 2023, equivalent to 6% of its paid up capital, according to an ADX disclosure (pdf).

Al Dhafra Ins. is paying out AED 35 mn in dividends for 2023, equivalent to 35 fils per share, the firm said in an ADX disclosure (pdf).

Takaful Emarat has raised the permitted percentage of foreign ownership in the company to 49%, up from 25% previously, according to a DFM disclosure (pdf). The increase is effective today.

Waha Capital’s board agreed to pay AED 188.4 mn in dividends for 2023, amounting to 10 fils per share, according to an ADX disclosure (pdf).

Dubai Financial Market is offering shareholders 3.5 fils per share in dividends for 2023, it said in a filing (pdf).

RAK Ceramics approved a dividend payout of 10 fils per share for both 1H 2023 and 2H 2023, bringing the total amount of dividends for the year to 20 fils per share, according to an ADX disclosure (pdf).