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On Tuesday of this week, BlackRock CEO & Chair Larry Fink published his letter to investors, which continues the theme in this week’s blogs of policies & reports from the world’s largest asset managers. BlackRock’s letter to shareholders doesn’t drop any bombshells about its portfolio company engagements or how it will vote at portfolio company meetings this spring – which is a good thing. Even without that drama, it understandably continues to get big headlines – and it is still an overall interesting read.

One thing I learned from this year’s letter is that, just like yours truly, Larry Fink’s dad owned a shoe store. The other thing I deduced is that this mid-March letter to investors could be the “new normal” for BlackRock communications. Based on the communication approach last year and this year, the January tradition of the “BlackRock Letter to CEOs” has fallen by the wayside, at least for now.

Something else that has fallen by the wayside is express “ESG” terminology, which has become too politically charged for Larry Fink’s tastes. However, BlackRock is not backing down from its multi-year messaging around the inevitable investment opportunity in the transition economy – specifically, with “energy infrastructure” as countries look to decarbonize their economies while at the same time achieving energy security. This year, though, the emphasis is on “energy pragmatism.” Here’s an excerpt:

Germany is a good example of how energy pragmatism is still a path to decarbonization. It’s one of the countries most committed to fighting climate change and has made enormous investments in wind and solar power. But sometimes the wind doesn’t blow in Berlin, and the sun doesn’t shine in Munich. And during those windless, sunless periods, the country still needs to rely on natural gas for “dispatchable power.” Germany used to get that gas from Russia, but now it needs to look elsewhere. So, they’re building additional gas facilities to import from other producers around the world.

Or look at Texas. They face a similar energy challenge – not because of Russia but because of the economy. The state is one of the fastest growing in the U.S., and the additional demand for power is stretching ERCOT, Texas’ energy grid, to the limit.

Today, Texas runs on 28% renewable energy – 6% more than the U.S. as a whole. But without an additional 10 gigawatts of dispatchable power, which might need to come partially from natural gas, the state could continue to suffer devastating brownouts. In February, BlackRock helped convene a summit of investors and policymakers in Houston to help find a solution.

Texas and Germany are great illustrations of what the energy transition looks like. As I wrote in 2020, the transition will only succeed if it’s “fair.” Nobody will support decarbonization if it means giving up heating their home in the winter or cooling it in the summer. Or if the cost of doing so is prohibitive.

“This is where the power of the capital markets can be unleashed to great effect,” the letter continues. And this ode to capital markets is the other big theme of the letter. In addition to highlighting BlackRock’s energy-related investments – such as a $12.5 billion agreement to acquire Global Infrastructure Partners (which owns things like pipelines, airports, wind projects, and more), the letter spotlights how capitalism makes America great. . . but not perfect.

Among other things, the letter discusses how BlackRock products can help solve not only our infrastructure problems, but also the looming global retirement crisis – and with that, the lack of hope among young people. While some might say that’s grandiose, I found it refreshing to read some traditional “marketing spin” in the annual letter to shareholders. Here are a few other interesting nuggets:

1. BlackRock will continue to invest in private markets in addition to public: “In private markets, we are prepared to capitalize on structural growth trends. Whether it’s executing on demand for much-needed infrastructure, or the growing role of private credit as banks and public lenders move away from the middle market, private capital will be essential. BlackRock is poised to capture share through our scale, proprietary origination, and track record. And we believe our planned acquisition of GIP will meaningfully accelerate our ability to offer our private markets capabilities to our clients.”

2. BlackRock will be offering more active equity funds (i.e., it’s not just “passive” index funds anymore): “BlackRock has been critical in expanding the market for ETFs by making them accessible to more investors and delivering new asset classes (like bonds) and investment strategies (like active).”

3. BlackRock will apply its voting policies to promote corporate governance & financial resilience: “we built one of the largest stewardship teams to engage with companies, often alongside our investment teams, because we never believed in the industry’s reliance on the recommendations of a few proxy advisors. We knew our clients would expect us to make independent proxy voting decisions, informed by our ongoing dialogue with companies – a philosophy that continues to underpin our stewardship efforts today. For our clients who have entrusted us with this important responsibility, we remain steadfast in promoting sound corporate governance practices and financial resilience at investee companies on their behalf.”

4. Voting Choice will continue to expand: “In 2022, BlackRock was the first in our industry to launch Voting Choice, a capability that enabled institutional investors to participate in the proxy voting process. Today, about half of our clients’ index equity assets under management can access Voting Choice. And in February, we launched a pilot in our largest core S&P 500 ETF, enabling Voting Choice for individual investors for the first time.”

– Liz Dunshee