Larry Fink Says Private Companies Create Structural ESG Problem

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BlackRock Inc. Chief Executive Officer Larry Fink said the prevalence of private companies in supply chains has created a “structural problem” that means it’s not feasible to have corporations report all their ESG risks.The comments feed into a debate around the extent to which companies should be expected to report their so-called Scope 3 emissions, which reflect the carbon footprints of customers and suppliers. The US Securities and Exchange Commission has proposed that big emitters should be required to disclose Scope 3, as part of a sweeping plan to get corporations to report their climate impact.

“Companies are very willing to report one and two,” Fink said of Scopes 1 and 2, which reflect a firm’s own emissions. “But to report Scope 3, then you were reporting on your supply chains and most of your supply chains are private companies on the supply side,” he said during a pre-recorded interview at the Oslo Energy Forum on Tuesday.

“And so this is the structural problem we’re facing in society today,” he said.

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Fink, whose firm has become a regular target of GOP attacks against environmental, social and governance investing strategies, has previously said it shouldn’t be up to asset managers to ensure that portfolio companies are doing their bit to protect the planet. In a June 2022 interview, he said it was wrong to expect the investment industry to act as “the environmental police,” as regulators look for ways to fight greenwashing.

BlackRock, which is the world’s largest asset manager, has called on the SEC to drop its plan to require larger companies to disclose Scope 3 emissions. Instead, the firm has suggested a framework whereby a company would disclose Scope 3 emissions or explain why it didn’t do so.