My Financial Musings...Walking the “woke” talk or walking in the trail of dinosaurs?

In a topsy turvy world, Larry Fink, a scion of capitalism as the founder and CEO of Blackrock, the world’s largest asset manager with US$10tr of assets is accused of being “woke” as he encourages more companies think of stakeholder capitalism. Is that an insult or a compliment?

Fink asserts: “It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers and communities your company relies on to prosper.  This is the power of capitalism” (a).  

He is also vocal in supporting investing according to environmental, social and governance (ESG) standards.   Blackrock is certainly not a paragon of virtue in terms of applying ESG metrics across the board and has been held to account for “greenwashing" but the message from Larry Fink is clear that companies must adjust or will be left behind.

At the other end of the spectrum Terry Smith, a UK star fund manager known for his no-nonsense investment approach has called out Unilever for spending too much time on selling “woke” mayonnaise rather than focussing on shareholder returns.  Almost on queue enter the activist Investor Nelson Peltz to shake up Unilever’s management which announces a substantial cost cutting programme putting a sizeable dent into their caring and sharing credentials. 

Which of these arguments is being made by the dinosaur destined for sudden extinction?

Are we moving from shareholder capitalism to stakeholder capitalism?  Certainly Larry Fink thinks this is the way to generate higher returns.  A recent study by Wharton (b) finds that companies that implement a multi stakeholder strategy can yield superior returns over the long term.  The rub is, pay back time can be lengthy and test the patience of most investors.  

Ultimately the question is whether the market will reflect society’s expectations.  Is being UNWOKE a more serious accusation than WOKE?  Although the current higher productivity and returns associated with ESG compliance is only apparent over the longer term, markets have a tendency to reflect change at a dramatically accelerated rate once the writing is on the wall. Are we at the tipping point for an imminent demise of the dinosaurs?