A major restaurant investor and the nation’s largest private-equity firm has alerted its portfolio companies that they need to aggressively address environmental, workplace and other social issues if they intend to remain an investment option.
Among the companies subject to the evaluation by BlackRock are a slew of restaurant operations, including The Cheesecake Factory, Wingstop, Texas Roadhouse and Applebee’s and IHOP parent Dine Brands.
All told, BlackRock holds about $10 trillion in assets for its customers across all sorts of businesses, most of which squarely depend on fossil fuels. All were told of the firm’s heightened expectations of social responsibility in BlackRock’s annual shareholder letter from CEO and co-founder Larry Fink.
“The pandemic has turbocharged an evolution in the operating environment for virtually every company. ... The relationship between a company, its employees, and society is being redefined,” Fink wrote. “As stewards of our clients’ capital, we ask businesses to demonstrate how they’re going to deliver on their responsibility to shareholders, including through sound environmental, social, and governance practices and policies.”
Much of the lengthy communication was devoted to the need for BlackRock’s portfolio companies and the business community in general to adopt cleaner forms of energy, a transition Fink termed “decarbonatization.”
“Few things will impact capital allocation decisions – and thereby the long-term value of your company – more than how effectively you navigate the global energy transition in the years ahead,” wrote Fink.
“It sent shockwaves through the corporate community,” said Franklin Coley, a principal of the public affairs company Align Public Strategies, which devoted much of its most recent "Working Lunch" podcast to the topic. “‘We need companies to get serious about getting away from fossil fuels to clean energy’—that’s what he’s demanding or expecting out of the companies in which BlackRock invests.”
“He’s challenging their credentials as business leaders,” added Joe Kefauver, a principle of Align and co-host of "Working Lunch." “It’s pretty strident.”
Fink noted that he was not tempering his commitment to the profit motive in suggesting that companies’ strategies reflect a commitment to social betterment.
“Stakeholder capitalism is not about politics,” he wrote, using the buzz term for investing with social considerations utmost in mind. “It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper.”
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