BlackRock Forges a New Bond With Big Oil

A BlackRock U-turn?

BlackRock made a name for itself, and many conservative enemies, in recent years by publicly embracing environmental, social and corporate governance considerations — known as E.S.G. — in its decisions, and arguing that other companies should do the same.

So the investment giant’s decision on Monday to name Amin Nasser, the C.E.O. of Saudi Arabia’s oil company Aramco, to its board feels like a major reversal, despite its claims that the move doesn’t contradict its E.S.G. commitments.

Nasser leads the world’s biggest oil producer, with Aramco having produced 13.6 million barrels of oil equivalent per day last year. He will succeed Bader Alsaad, the director general of the Arab Fund for Economic & Social Development, on BlackRock’s board.

Is the appointment a U-turn for BlackRock on climate? Larry Fink, the firm’s C.E.O., has spent years saying that E.S.G. principles were crucial business considerations. That approach has come under fire from conservative politicians who have attacked BlackRock for its commitment to what they called “woke” policies, and several officials in red states have withdrawn billions of their assets from its coffers in retribution.

Mr. Fink said last month that he had stopped using E.S.G., calling it a “weaponized” term, but he added that the firm was continuing to push companies to take steps to decarbonize. And in announcing Mr. Nasser’s appointment, BlackRock emphasized his “understanding of the global energy industry and the drivers of the shift towards a low carbon economy.”

But Mr. Nasser has criticized decarbonization efforts. While the kingdom has announced several clean energy initiatives, including a $1.5 billion energy-transition fund, Mr. Nasser has questioned current efforts to reach a lower-carbon future.

“The current transition plan is flawed honestly,” he said last year. “It is not really delivering. What we need is an optimal, realistic transition plan.”

Mr. Nasser also solidifies BlackRock’s ties to Saudi Arabia at a time of heightened controversy over the kingdom’s record on human rights. The PGA Tour’s tentative deal involving LIV Golf, the Saudi-backed rival competition, has renewed scrutiny of the country as it pours money into Western businesses.

Mr. Fink backed out of the kingdom’s Future Investment Initiative conference in 2018 after the murder of the Saudi dissident and journalist Jamal Khashoggi, but he returned the next year and has since defended doing business with the country.

HERE’S WHAT’S HAPPENING

Extreme heat is bearing down on the Northern Hemisphere. Parts of Europe and the southern United States are expected to experience record-breaking highs, with consequences for human health and economic activity. As China faces sweltering heat, John Kerry, the U.S. climate envoy, met with the country’s premier to urge cooperation in fighting climate change.

Microsoft and Activision reportedly plan to extend a deadline for their deal. Microsoft’s $70 billion takeover of the video game maker isn’t poised to close on Tuesday as expected, as the two negotiate a settlement with Britain’s antitrust regulator, according to Bloomberg. The Competition and Markets Authority, which had previously moved to block the transaction, has set an Aug. 29 deadline for the talks.

Senator Elizabeth Warren urges the S.E.C. to investigate Tesla. The Massachusetts Democrat called on the agency to examine potential “conflicts of interest, misappropriation of corporate assets” and more, citing reports about Elon Musk bringing over Tesla employees to work at Twitter after he bought the social network. She suggested that the move may have violated employment laws and wasn’t properly disclosed to investors.

U.S. companies win some relief from a global tax deal. Under new rules negotiated by the Treasury Department, American businesses now have until 2026 before other countries can start imposing new levies on corporations deemed to have paid too little in the United States. The revised agreement offers more certainty for companies, but the Biden administration is still struggling to conform to the pact to avoid losing out on taxes.

A Labor Day milestone for the Hollywood strike

As screenwriters and actors — including celebrities like Jason Sudeikis and Kevin Bacon — walked picket lines on Monday, media moguls are starting to sweat over the reality of a two-headed Hollywood strike.

Studios insist that they can ride out the work stoppage that has largely shut American movie and TV productions. But there’s growing fear that if it stretches beyond a little more than a month, their business could suffer badly.

A countdown to Labor Day looms. Three studio chairs told The Times that Hollywood could sit idle until early September with no major long-term business damage. TV studios are continuing to introduce contingency plans for the fall: CBS became the latest on Monday, announcing a lineup composed of reruns of “Yellowstone” and reality and game shows.

But a strike that goes on longer would most likely mean big delays for projects set for next year, threatening to make 2024 a ghost town for content. And TV giants can survive on lineups built largely on the likes of “Survivor” and “The Golden Bachelor” for only so long.

The costs of a lengthy strike are becoming clearer. While media executives suggested that they could use the work stoppage to cut costs, including by ending some expensive production deals, those benefits will be short-lived. The media mogul Barry Diller recently outlined to “Face the Nation” the knock-on effects of an extended strike:

“You’re going to see subscriptions get pulled, which is going to reduce the revenue of all these movie companies, television companies, the result of which is that there will be no programs. And at just the time, strike is settled, that you want to get back up, there won’t be enough money. So this actually will have devastating effects, if it is not settled soon.”

And the analyst Michael Nathanson of MoffettNathanson noted that American studios could suffer if platforms like Netflix turn to overseas content producers for new movies and shows. “It’s like if the United Auto Workers go on strike, and all of a sudden you see more cars from Japan and Germany on the road,” he told The Times.

Mr. Diller has already proposed a solution. “As a good-faith measure, both the executives and the most-paid actors should take a 25 percent pay cut to try and narrow the difference between those who get highly paid and those that don’t,” he told “Face the Nation.” On Monday, a group representing studios in the labor talks said that before the strike, its members had offered over $1 billion worth of concessions on pay and benefits, as well as limits on their use of artificial intelligence.

It’s unclear whether that would be enough, however, with all sides acknowledging that battle lines are hardened.

A Ripple effect for crypto enforcement

Crypto fans are celebrating after a federal judge last week gave the digital currency industry a partial win over the S.E.C.

Though the agency in 2020 had accused Ripple of failing to register its XRP token as a security, the judge ruled that XRP wasn’t a security in all contexts. It wasn’t a total victory, but Ripple and its allies are claiming it as a major accomplishment anyway.

The case was seen as a bellwether of crypto’s future in the United States amid the S.E.C.’s aggressive enforcement actions against the industry. Gary Gensler, the agency’s chair, has repeatedly argued that most digital tokens are securities, though crypto companies have protested that this approach was trying to regulate them out of existence instead of giving clearer rules.

What the judge ruled: When XRP was sold to institutional investors, the token was a security because investors relied on Ripple’s assertions that its value would rise. But when it traded on secondary exchanges, retail investors didn’t have those same expectations, so XRP wasn’t considered a security in that context.

Industry executives hope the ruling has set a helpful precedent. Coinbase, for instance, is betting that the decision augurs well for its fight against the S.E.C., which has accused it of selling unregistered securities.

But securities law experts aren’t celebrating. “The decision is at odds with what securities law is meant to do,” Hilary Allen, a professor at American University Washington College of Law, told DealBook, arguing that retail traders should get more protection than presumably more sophisticated institutional investors.

And Tyler Gellasch, a former S.E.C. lawyer who now leads the Healthy Markets Association, said that the ruling created a “massive loophole” for many companies, even outside crypto. “This decision is my real-life nightmare scenario,” he said.

12

— The number of Taylor Swift albums to top the charts, the most ever by a woman after the singer surpassed the Barbra Streisand’s record of 11.

Goldman prepares to face its naysayers

The big event for Wall Street earnings will come on Wednesday, when Goldman Sachs reports second-quarter results. Questions — and frustrations — are swirling about its slumping stock, its troubled foray into consumer banking, including its acquisition of the buy-now-pay-later firm GreenSky, and the future of its C.E.O., David Solomon.

Here’s what DealBook will be watching:

How big of a goodwill hit will Goldman take on GreenSky? The bank has announced that it is exploring a sale of the firm it purchased last year for $2.2 billion, as part of its retrenchment from Solomon’s big consumer push. But bids have come in well below expectations.

What’s the future of its Apple partnership? The bank is reportedly in talks to offload the business to American Express, despite Goldman’s public support for the alliance. “It’s a very, very strong part­ner­ship where there’s a lot of op­por­tu­nity,” Mr. Solomon said in October.

Are more layoffs planned? The bank has made job cuts this year, and there are reports it’s not done slashing costs. (The bank recently resumed its historical practice of letting go of underperformers.) Internally, there’s concern that Goldman will nominate significantly fewer bankers to its managing director class this year. As one banker told DealBook: “I don’t know if I’m getting promoted — or fired.”

What about profits? Investors will be focused on average return on equity. The goal is to hit 14 to 16 percent on this key measure of profitability. Reports suggest that it could come in far lower (Goldman itself has been publicly downplaying expectations in a break with tradition), further evidence that the bank is falling behind Wall Street heavyweights such as JPMorgan Chase.

Will Goldman say any more about the appointment of Tom Montag? The firm said last month that it had tapped the former Bank of America and Goldman executive to join its board.

Mr. Montag has a reputation for strong risk management. But his appointment created a stir inside Goldman and beyond, given Mr. Solomon’s efforts to move the bank away from an old boys’ club reputation.

Will Solomon address his future? He appears to want the naysayers to know that Goldman’s board is well and truly behind him. But Wednesday brings a big test, with many Wall Street watchers expecting the bank to deliver a dud — a scenario that Goldman itself has been leaking in recent weeks to lower expectations.

THE SPEED READ

Deals

Policy

• Donald Trump and his allies are planning to increase presidential powers if he wins the 2024 election. (NYT)

• U.S. regulators will reportedly release new banking rules next week that will overhaul capital rules. (Bloomberg)

• “Jerome Powell’s Prized Labor Market is Back. Can He Keep It?” (NYT)

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