Raphael Stevens

“As I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police,” BlackRock CEO Larry Fink said in his annual letter to investors, published Wednesday.
Fink has become a target for Republican lawmakers who view environmental, social, and governance (ESG) investing as a proxy for financiers impressing their political viewpoints.
Fink says it is BlackRock’s fiduciary duty to give investors access to the best and most complete information to make their financial investment decisions, and that includes climate data.

Laurence “Larry” Fink, chairman and chief executive officer of BlackRock Inc., pauses as he speaks during the BlackRock Asia Media Forum in Hong Kong, China.
Justin Chin | Bloomberg | Getty Images

Asset managers like BlackRock are not “the environmental police,” Larry Fink said in his annual chairman’s letter to investors, which was published on Wednesday.
“As I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police,” Fink wrote.

But BlackRock takes its role as a fiduciary for clients incredibly seriously, the letter makes clear. Doing that job well requires BlackRock to monitor the risk climate change poses to financial assets.
“Investing for the long term requires taking a long-term view of what will impact returns, including demographics, government policy, technological advancements, and the transition to a low-carbon economy,” Fink wrote.
“For years now, we have viewed climate risk as an investment risk. That’s still the case,” Fink said.
Fink has become a target for Republican lawmakers who view environmental, social, and governance (ESG) investing as a proxy for financiers impressing their political viewpoints.
For instance, in Aug. 2022, Texas Comptroller Glenn Hegar targeted BlackRock, putting the asset manager on a list of financial companies that “boycott energy companies.”

‘Anyone can see the impact’

In his annual letter, Fink highlighted the ways that climate change is already impacting financial markets and the economy.
“Anyone can see the impact of climate change in the natural disasters in California or Florida, in Pakistan, across Europe and Australia, and in many other places around the world. There’s more flooding, more wildfires, and more intense storms. In fact, it’s hard to find a part of our ecology – or our economy – that’s not affected,” Fink wrote. “Finance is not immune to these changes. We’re already seeing rising insurance costs in response to shifting weather patterns.”
Natural disasters cost the insurance giant Munich Re $120 billion in 2022, which Fink called “a once unthinkable figure.”
The federal government’s National Flood Insurance Program, which underwrites many insurance policies in Florida, is $20.5 billion in debt and has had to borrow money from the U.S. Treasury, Fink said.
Blackrock has customers who want to invest in the energy transition and others who do not, Fink said, and Blackrock serves both types. But if clients want to understand how climate risk will affect their investments, Blackrock will provide that information.

I wrote last year that the next 1,000 unicorns won’t be search engines or social media companies. Many of them will be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers. I still believe that.

Larry Fink
CEO of Blackrock

“It is not the role of an asset manager like BlackRock to engineer a particular outcome in the economy, and we don’t know the ultimate path and timing of the transition. Government policy, technological innovation, and consumer preferences will ultimately determine the pace and scale of decarbonization,” Fink wrote. “Our job is to think through and model different scenarios to understand implications for our clients’ portfolios.”
That is why Fink has pushed for climate risk disclosures at companies. More than half of the S&P 500 voluntarily report their own Scope 1 and 2 emissions, Fink said.
Scope 1 emissions are those greenhouse gasses that come from assets that are owned or controlled by an organization, such as boilers, furnaces or vehicles, according to the U.S Environmental Protection Agency. Scope 2 emissions are the greenhouse gas emissions that are associated with the electricity, steam, heat or cooling that an organization uses.
Scope 3 emissions, which are much harder to track, are emissions resulting from the assets in an organization’s supply chain.
While Fink advocates the importance of measuring climate risk in business, he also says oil and gas are necessary to meet energy needs in the short-term. BlackRock is investing in natural gas pipelines, with efforts made to mitigate methane emissions from those natural gas pipelines, Fink said.
At the same time, BlackRock is providing options for investors to invest in clean tech, such as carbon capture storage pipelines and technology that turns waste into natural gas, he said.
“I wrote last year that the next 1,000 unicorns won’t be search engines or social media companies. Many of them will be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers. I still believe that,” Fink writes. “For clients who choose, we’re connecting them with these investment opportunities.”

WATCH LIVEWATCH IN THE APP More

Shares of embattled bank Credit Suisse hit another all-time low for a second consecutive day.
Credit Suisse’s biggest backer, Saudi National Bank, has said it won’t provide further financial help for the bank.
Speaking to CNBC’s Hadley Gamble during a panel session in Riyadh on Wednesday morning, Credit Suisse Chairman Axel Lehmann declined to comment on whether his firm would need any sort of government assistance in the future.

Commuters cycle past a Credit Suisse Group AG bank branch in Basel, Switzerland, on Tuesday, Oct. 25, 2022. Credit Suisse will present its third quarter earnings and strategy review on Oct. 27.
Stefan Wermuth | Bloomberg | Getty Images

Shares of Credit Suisse on Wednesday plunged to a fresh all-time low for the second consecutive day after a top investor of the embattled Swiss bank said it would not be able to provide any more cash due to regulatory restrictions.
Trading in the bank’s plummeting shares was halted several times throughout the morning as it fell below 2 Swiss francs ($2.17) for the first time.

The stock recovered slightly by around midday London time, before extending losses in early afternoon deals. Credit Suisse was last seen trading over 30% lower for the session.
The share price rout renewed a broader sell-off among European lenders, which were already facing significant market turmoil as a result of the Silicon Valley Bank fallout. Several Italian banks on Wednesday were also subject to automatic trading stoppages, including UniCredit, Finecobank and Monte Dei Paschi.
Credit Suisse’s largest investor, Saudi National Bank, said it could not provide the Swiss bank with any further financial assistance, according to a Reuters report, sparking the latest leg lower.
“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters Wednesday. However, he added that the SNB is happy with Credit Suisse’s transformation plan and suggested the bank was unlikely to need extra money.
The Saudi National Bank took a 9.9% stake in Credit Suisse last year as part of the Swiss bank’s $4.2 billion capital raise to fund a massive strategic overhaul aimed at improving investment banking performance and addressing a litany of risk and compliance failures.

Meanwhile, speaking to CNBC’s Hadley Gamble during a panel session in Riyadh on Wednesday morning, Credit Suisse Chairman Axel Lehmann declined to comment on whether his firm would need any sort of government assistance in the future.

When asked if he would rule out some kind of assistance, Lehmann answered, “That’s not the topic.”
“We are regulated, we have strong capital ratios, very strong balance sheet. We are all hands on deck. So that’s not the topic whatsoever.”

‘Material weaknesses’

Investors are also continuing to assess the impact of the bank’s Tuesday announcement that it had found “material weaknesses” in its financial reporting processes for 2022 and 2021.
The Swiss lender disclosed the observation in its annual report, which was initially scheduled for last Thursday but was delayed by a late call from the U.S. Securities and Exchange Commission.
The SEC conversation related to a “technical assessment of previously disclosed revisions to the consolidated cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”
In late 2022 the bank disclosed that it was seeing “significantly higher withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows at levels that substantially exceeded the rates incurred in the third quarter of 2022.”
Credit Suisse saw customer withdrawals of more than 110 billion Swiss francs in the fourth quarter, as a string of scandals, legacy risk and compliance failures continued to plague it.

Correction: This story has been updated with the correct figure for Credit Suisse’s capital raise.

WATCH LIVEWATCH IN THE APP More

The contagion effect from the recent collapse of Silicon Valley Bank is local and contained, said Credit Suisse Chairman Axel Lehmann.
Embattled banks Silicon Valley Bank and Silvergate were not subjected to strict enforcements that govern bigger banks in the U.S. and other parts of the world, Lehmann said.
However, the banks’ fallout still serves as a “warning signal” for the overall market climate, the chairman cautioned.

The logo of Swiss bank Credit Suisse is seen at a branch office in Zurich, Switzerland, November 3, 2021.
Arnd Wlegmann | Reuters

The contagion effect from the recent collapse of Silicon Valley Bank is local and contained, Credit Suisse Chairman Axel Lehmann said Wednesday, who also declined to comment on whether his firm would need any sort of government assistance.
On Friday, SVB was taken over by regulators after massive withdrawals a day earlier effectively created a bank run. HSBC agreed on Monday to buy the British arm of the troubled U.S. tech startup-focused lender for £1 ($1.21).

Concerns of contagion and increased regulation and just some general profit-taking caused European banks to post their worst day in more than a year on Monday. The heavy selling continued on Wednesday with Credit Suisse itself falling more than 28%.

That leg lower was sparked by Credit Suisse’s largest investor, Saudi National Bank, which said it could not provide the Swiss bank with any further financial assistance, according to a Reuters report.
“We cannot because we would go above 10%. It’s a regulatory issue,” Saudi National Bank Chairman Ammar Al Khudairy told Reuters Wednesday. However, he added that the SNB is happy with Credit Suisse’s transformation plan and suggested the bank was unlikely to need extra money.
When asked by CNBC’s Hadley Gamble at a panel session in Riyadh Wednesday if he would rule out some kind of government assistance in the future, Lehmann answered: “That’s not the topic.”
“We are regulated, we have strong capital ratios, very strong balance sheet. We are all hands on deck. So that’s not the topic whatsoever.”

Embattled lenders Silicon Valley Bank and Silvergate were not subjected to strict enforcements that govern bigger banks in the U.S. and other parts of the world, Lehmann also said on the panel session.
“I look to what has happened in Silicon Valley Bank, and subsequently other midsize banks — they are not really subject to stringent regulation, as you have in other parts of the world,” he said, citing the Basel III requirement that underpins most banks’ operating framework.
“So in this regard, I think [the contagion] is somewhat local and contained,” he said.
However, Silicon Valley Bank’s fallout still serves as a “warning signal” for the overall market climate, the chairman cautioned.
The Swiss lender on Tuesday revealed that it had identified “certain material weaknesses” in its internal control over financial reporting for the years 2021 and 2022.
It also recently confirmed its 2022 results announced on Feb. 9, which recorded a full-year net loss of 7.3 billion Swiss francs ($8 billion).

WATCH LIVEWATCH IN THE APP More

Shares of the Swiss bank fell more than 20% after its biggest backer said it won’t provide further financial support.
The move appeared to be hitting large U.S. banks as well.
While Credit Suisse’s struggles appear unrelated to the mid-tier U.S. banks, the combination of the two issues could spark a broader reexamination of the banking system among investors, according to Peter Boockvar of Bleakley Financial Group.

A man is seen in silhouette walking past a branch of Switzerland’s Credit Suisse bank in Vevey, western Switzerland, on March 15, 2023
Fabrice Coffrini | AFP | Getty Images

Bank stocks were under pressure on Wednesday as the sharp drop of Credit Suisse rattled a segment of the market that was already reeling from two large bank failures in the past week.
Shares of the Swiss bank fell more than 27% after its biggest backer said it won’t provide further financial support. Credit Suisse announced on Tuesday that it had found “material weakness” in its financial reporting process from prior years. Other European banks also slid, including an 8% drop for Deutsche Bank.

The move appeared to be hitting large U.S. banks as well. Shares of Wells Fargo and Citi fell more than 4% each in premarket trading, while Bank of America dipped 3%. JPMorgan and Goldman shed more than 2%.

Stock chart icon

Shares of Wells Fargo were under pressure on Wednesday.

Credit Suisse struggles come on the heels of the collapse of Silicon Valley Bank and Signature Bank in the U.S. Those failures caused steep sell-offs in regional bank stocks on Monday. The SPDR S&P Regional Bank ETF (KRE) fell more than 4% in premarket trading on Wednesday. Zions Bancorp and Western Alliance each fell more than 6%.
While Credit Suisse’s struggles appear unrelated to the mid-tier U.S. banks, the combination of the two issues could spark a broader reexamination of the banking system among investors, according to Peter Boockvar of Bleakley Financial Group.
“What this is telling us is there’s the potential for just a large credit extension contraction that banks are going to embark on [to] focus more on firming up balance sheets and rather than focus on lending,” Boockvar said on CNBC’s “Squawk Box.”
“It’s a balance sheet rethink that the markets have. Also you have to wonder with a lot of these banks if they’re going to have to start going out and raising equity,” he added.

In that vein, Wells Fargo on Tuesday filed to raise $9.5 billion of capital through the sale of debt, warrants and other securities. The bank said the new cash will be used for general corporate purposes.
The fallout from the collapse of SVB could also lead to more regulation and rising costs for the U.S. banking sector, including the potential for higher fees to regulators to pay for deposit insurance.

WATCH LIVEWATCH IN THE APP More