Larry Fink, chief executive of BlackRock, said the hardest part of running the giant asset management company in the midst of a global pandemic has been maintaining the “conservation of our culture.”
Speaking Thursday morning at Morningstar Virtual Conference, Fink said disruptions and adjustments related to remote working have had minimal impact on business operations. But with most of the company working remotely, “I still don’t know how we’re going to do on a cultural basis.”
That said, Fink admitted that the mega asset manager has been doing pretty well, although the future of the company and industry remains uncertain.
“We have 400 young people who joined our workforce in July and have never been to the office,” he said.
Like the rest of the financial services industry, Fink said BlackRock has recognized some positive aspects of remote work policies, and is already considering the potential impacts of COVID-19.
“Many issues will be tested over time if we work remotely for a longer period of time,” he said.
BlackRock is slowly moving around 30% of its workforce from the main offices in San Francisco, New York and London to offices. And Fink said he plans to start commuting to the office about three days a week from next week.
But the long-term outlook is for a “new paradigm,” he said.
“I don’t think BlackRock will ever be back 100% back to the office, and I don’t think we’ll be the same operational company we were before COVID,” he said. “It will be a new workforce and a new paradigm, but I think it will be a better paradigm with less congestion in cities and less pollution.”
On general investment management topics, Fink also sees a state of constant change. Asked about public debt and deficit levels, Fink said he had no short-term concerns, but “probably” had longer-term concerns.
“In the short term in the United States, we must continue to increase our deficits,” he said. “The Covid has accelerated major macro trends. Some industries have a lot of job losses and Amazon announces 100,000 new jobs. “
On investors’ decade-long shift from active management to passive index investing, Fink offered an alternative perspective that asset flow is in fact active management is a disguise.
“What we have seen in recent years in ETF growth is not passive investing, we are seeing more and more active investors using passive ETFs to gain their active exposure,” he said. “One of the real myths is that everyone who invests in passive ETFs is passive investors. They are not.”
Then there is the growing push from asset management towards environmental, social and governance investing, an area in which Fink has become a strong advocate. “The existential health risk of COVID has only made climate risk a bigger component,” he said.
At BlackRock, this increased focus matches the inflows into sustainable ETFs for the first six months of 2020, surpassing the category inflows for all of 2019. Fink said the pedal is on the ground when it comes to investments. ESG.
“We are committed by the end of 2020 to integrate all our portfolios with ESG,” he said. “Climate risk is an investment risk.”
However, when challenged, Fink said BlackRock would not change the makeup of major stock indices to meet a particular ESG goal.
“It’s not our money; our job is to show investors what climate risk does to portfolios, and to educate and persuade, but our job is to always be a fiduciary, ”he said. “I am an environmentalist. I understand what environmentalists are asking for. Yet if they really want to make a difference, they have to go to the asset owners. When customers want the S&P 500, they don’t want the S&P 494. ”
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