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NEW YORK, July 18 (Reuters Breakingviews) – BlackRock (BLK.N) is embracing the world’s largest oil company. The $109 billion asset manager run by Larry Fink said on Monday it would add Saudi Aramco (2222.SE) Chief Executive Amin Nasser to its 16-strong board. Cozying up to the boss of the state-controlled energy giant could invite a political firestorm at home. But judged through an investment lens the appointment makes sense.
On one level, BlackRock is simply substituting one Middle Eastern director with another. Nasser, who led Aramco through its 2019 initial public offering, will take the seat currently occupied by Bader Alsaad, a former managing director of the Kuwait Investment Authority. However, Saudi Arabia is a key member of the Organisation of the Petroleum Exporting Countries, making Nasser an influential player in the future of fossil fuels.
It’s not the only reason the appointment is a potential hot button in the United States. The corporate backlash that followed the 2018 killing of Jamal Khashoggi by Saudi agents has mostly subsided. But some Americans are still raw. Last week former AT&T (T.N) Chief Executive Randall Stephenson cited the journalist’s murder as a factor in his resignation from the board of the Professional Golfers’ Association, which struck a deal with a rival backed by Saudi’s sovereign wealth fund.
Fink might therefore be shifting damage control from one end of the political spectrum to another. BlackRock has recently faced criticism from the U.S. energy industry for its support of climate-conscious corporate policies. Installing Nasser could help appease oil supporters in states like Texas, which have pressured public funds to pull their money from BlackRock. But it might incite others. Connecticut Senator Richard Blumenthal has been critical of Saudi-inspired efforts by OPEC to push up oil prices.
Yet Fink’s relationship with Saudi Arabia and the energy industry is more nuanced than his critics may suggest. The asset manager inked a deal to invest in an Aramco pipeline in 2021. Its most recent investor day presentation dedicates almost 10% of its space to the energy transition. And Blackrock’s iShares Global Energy exchange-traded fund, whose largest holdings include Exxon Mobil (XOM.N), Chevron (CVX.N), and Shell (SHEL.L), has strongly outperformed the S&P 500 Index (.SPX) over the last three years.
Moreover, the investment manager is showing no signs of suffering from the backlash. Its assets under management grew 11% to $9.4 trillion in the second quarter compared to last year while its stock is up more than 20% over the past 12 months, comfortably beating rivals like T Rowe Price (TROW.O) and Invesco (IVZ.N). That suggests ignoring the zeitgeist is the best plan for Fink – and his investors.
CONTEXT NEWS
BlackRock on July 17 said Amin Nasser, chief executive of Saudi Aramco, would join its board as an independent director. Nasser, who joined the world’s largest oil company in 1982 and will be the 16th member of BlackRock’s board, will fill the seat of Bader Alsaad, former member of the board of the Kuwait Investment Authority.
“Amin’s distinguished career at Aramco, spanning more than four decades, gives him a unique perspective on many of the key issues facing our firm and our clients,” BlackRock Chief Executive Larry Fink said in a statement.
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