1 month ago

    BlackRock’s Global Influence: From Crypto ETFs to ESG and Real Estate Ventures

    BlackRock’s Global Influence: From Crypto ETFs to ESG and Real Estate Ventures
    Table of contents

      Blackrock, the largest asset management company globally with $10 trillion in assets under management, has made headlines over the past year. Likewise, its CEO Larry Fink has been appearing in the press, speaking openly about the future of finance. More importantly, the asset manager has been giving views on tokenization, environmental sustainability, governance, and social issues.

      Considering the company’s influence on Wall Street and global finance, its stance on different topics is always an opportunity for praise or backlash. More recently, Blackrock and Larry Fink have been on the path to set the record straight about ESG matters. This includes the March 19, 2024, Texas Permanent School Fund drop from the asset manager.

      Still, there is more to Blackrock than these jabs from different sides. Its presence in the crypto industry is palpable, as it raked up the biggest ETF launch in history with its spot Bitcoin ETF at the beginning of the year.

      Blackrock Approved Spot Bitcoin ETF

      It is not news that Blackrock, among other Wall Street institutional investors, has been chasing after the crypto hype. This year marks the successful entry of several companies into Bitcoin ETFs. In January, the Securities and Exchange Commission (SEC) approved several spot Bitcoin ETPs (exchange-traded products). The asset management company had initially submitted its filing in 2023, receiving the SEC’s approval for its ETF’s proposal in July. At the time, the commission opened reviews into several applications, including VanEck and Fidelity’s Wise Origin Bitcoin Fund (FBTC).

      Blackrock’s iShares Bitcoin ETF was approved alongside Grayscale, VanEck, 21Shares, Valkyrie, and more. Now, the ETF stands among some top-traded funds on exchanges like NASDAQ. Notably, the fund has 195 985 BTC already, going head-to-head with companies like Microstrategy, which have been making headlines as top institutional investors. It is only the fund’s beginning, with more potential in days to come as it adds to its BTC holdings.

      Larry’s Thoughts on BTC and Crypto

      Larry has a more positive outlook on the crypto industry than in 2017. In recent years, he has become a believer in how much BTC and other crypto can change the direction of financial assets and crypto banking. He believes BTC, ETH, and other crypto can act as safe-haven assets, enabling value storage. Especially for BTC, which has a finite supply, Blackrock sees a future in which it acts as gold for wealth-holding.

      In terms of ETFs, he trusts that, with time, they will open doors to tokenization, introducing a new era in tokenized assets.

      In tokenized systems, he sees a more transparent and efficient future, enabling transfer of ownership, battling money laundering and other corruption issues, etc. In the long run, Blackrock hopes to surround its financial activity with ETFs, providing new asset classes for investors while transforming its investment space. Furthermore, this would be a crucial step considering the growing interest of people, institutions and governments in Bitcoin.

      Currently, the iShares Bitcoin Trust offers competitive options compared to its counterparts, including Grayscale. One way is through its lower fees, which are among the most efficient in the BTC trusts today. The fund is also receiving much support, with Coinbase announcing its plan to support the iShare ETF. This is not the first time the two companies have worked together, as Coinbase opened doors for Blackrock investors to access Bitcoin in 2022.

      Fink’s 2024 Annual Letter to Investors: “Time to Rethink Retirement”

      According to 2024’s annual letter to investors, Larry outlines why the current retirement age is bound to create an economic crisis. Blackrock’s CEO believed insolvency was fast approaching due to a lack of funds to sustain retirement settlement.

      According to him, part of this issue came from the population’s “longevity in retirement”. Likewise, this puts a strain on Social Security’s financial well-being. He went on to quote the Social Security Administration 2023 report, which mentioned that by 2033, it might be unable to pay their dependents full benefits. Notably, Social Security and Medicare are the funds retirees depend on the most after their active years. And while the Biden administration promises to strengthen the funds, the outlook, according to Fink, is bleak. The report states a major turn-back would be necessary to avoid up to 25% benefits reduction.

      On March 11, Biden suggested a tax hike to keep Social Security afloat. However, not everyone, including former US President Donald Trump, supports this idea. For this reason, Fink believes that a raise in retirement age might reduce the possible impacts of the current retirement situation. He also mentioned that incentivizing people to work for more years could positively impact labor force participation rates.

      At the same time, Fink reiterated the growing debt situation in the US, with its ratio currently at approximately 225% to the GDP. He insisted on the need for the country to adopt better policies that could drive economic growth amid the crises. These factors could encourage an increased interest in crypto as a financial cushion and alternative investment option. This possibility places its long-term mission of improving its ETF for inclusivity and financial freedom at a better point.

      Blackrock and Its ESG Motion

      Over the years, Blackrock’s interest in managing environmental, social, and governance (ESG) issues has been clear. Larry Fink made his stance on ESG open to the world in 2018, making the term a mainstream idea. He worked toward global capitalism and sustainability, allowing Blackrock investors to easily access opportunities in companies working toward a more favorable social and economic vision.

      Some indicators of its participation in climate change initiatives include:

      • Larry Fink’s letters to company executives under its management over the years directly focus on sustainable investments. These statements have been making headlines within and outside the ESG community.
      • Joining the investor-led climate-related initiative, Climate Action 100+ in 2020, working toward a goal of net zero emissions by 2050.
      • In 2021, Blackrock joined many asset managers working toward the same goal of net zero carbon and greenhouse gas emissions by 2050.

      Larry Fink has been at the frontline of all these efforts, reiterating the essence of short-term targets by CEOs while still looking for long-term approaches to the issue. However, he believes that “every government, company, and shareholder must confront climate change.” That is per his statement in the 2020 letter to CEOs.

      Larry’s idea behind ESG has not been exactly smooth sailing though. If anything, this mission keeps facing backlash from different parties in the political and financial scenes. In June 2023, he backtracked his use of the term ESG, stressing his disappointment at how politicized it had become. Still, he insisted that he would not drop the principles driving the idea, as reflected in the 2024 annual report. For this reason, he is still pushing sustainable investing and stakeholder capitalism. Stakeholder capitalism offers every participant within its company voting choices, offering inclusion for all.

      In an interview with CNBC in 2023, Fink mentioned the need for democratized investments through ETFs. That being said, the asset manager’s interest in crypto adds to its future mission of transforming financial investments.

      Leveraging Energy Infrastructure

      Larry considers the growing infrastructural sector in developing and developed countries despite the varying reasons for this trend. He mentions that developing countries with improved living standards demand more infrastructural development, including housing, transport, energy, and communication. In developed countries, the aim is to build new structures while repairing existing ones.

      However, he believes that energy infrastructure is where to invest, mentioning the growing transition to renewable sources, such as solar and wind. At the same time, he acknowledges how cheap these sources are.

      But is it true that the world should fully transition to renewable energy options in decarbonization efforts? Fink believes differently. From his exploration into the past and the more recent energy crisis, the world still needs both sources. This factor brings rise to energy pragmatism as the way to achieve decarbonization and combat climate change in the long term.

      Texas Permanent School Fund Drops from Blackrock

      The ESG fiasco continued as the Texas Permanent School Fund withdrew its $8.5 billion investment from the asset management company. According to a tweet on March 19, the Texas State Board of Education chairman, Aaron Kinsey, released a statement concerning the same. It was in their belief that Blackrock’s ESG mission adversely affected the state’s energy industry. Kinsey stated that the PSF had a duty to protect annual oil and gas royalties depended on by Texas Schools.

      He also outlined that investing with companies similar to Blackrock defied the Texas Code Section 809, ranking the asset manager as a company boycotting energy companies. While Fink did not directly talk against the fund’s beliefs and decision, he mentioned that Blackrock’s mission was not to divest from fossil fuels. He took note of efforts by companies such as Occidental, which work with traditional and renewable energy sources.

      He also took Texas as an example to maintain his idea of energy pragmatism, reiterating its 28% use of renewable energy, 6% more than the country as a whole. The increased state’s growth makes it one of the fastest-growing in the US. Still, it suffers an energy crisis, which may necessitate it to leverage oil and gas as an alternative for dispatchable energy. Blackrock’s At Grid summit in Houston in February aimed to find solutions to the brownouts experienced in the state. Different policymakers and investors in the region were in attendance.

      Blackrock and Real Estate

      According to a Blackrock statement in the past, it is not actively involved in buying single-family real estate. However, it manages investments for companies associated with real estate. It also provides mortgage securities to people hoping to buy homes. More work includes financing new housing projects while investing in the larger real estate market. With Blackrock’s vision of tokenization, it could leverage blockchain technology and asset tokenization for its real estate ventures, providing more efficient pathways for ownership, contracts, transfers, and more. That is taking into account the growing interest in blockchain in real estate.

      How ETFs Will Play Into Its Future

      Be it its ESG goals or other plans for the future, Blackrock places ETFs at the center of its long-term goals. Fink mentions the company’s dedication to achieving clients’ expectations since its creation. With ETFs, he believes he can create a better experience for all investors under Blackrock’s management.

      Fink further hopes that the future will open more doors for innovations, providing more investment access to ETFs globally. Likewise, this will open people’s access to cryptocurrencies like BTC. Considering its tendrils stretching into both public and private markets, there is much to be seen on how the asset manager can improve ETFs as a go-to financial technology. Hopefully, we can see the future of tokenization of all assets under its wing, including energy, real estate, and financial assets, introducing more efficient options for its investors.

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