Black Rock CEO calls for accountability and vision in annual address
BlackRock CEO Larry Fink has called for accountability and vision in his annual letter to the world’s CEOs, issuing a stark reminder that we ignore our fragility as a species at our peril — and arguing that the way companies respond to the climate change threat will be a ‘defining factor’ in their long-term prospects.
Fink who began writing his annual letters in the wake of the 2007 financial crisis, notes the pandemic has been a powerful catalyst, enveloping the entire globe and transforming the way we live — as well as setting the ground for a vision of the future.
Social justice and demographic challenges were also addressed in the letter, from the growing retirement crisis to systemic inequalities and recent political turmoil in the US, reminding the world how vulnerable and precious the democratic system can be, and underlining the interdependence between environmental and social issues.
Yet, despite his uncompromising clarion call, Fink’s message is offset by optimism, acknowledging an accelerated potential for change and growth, borne from a world woken by a world health emergency and the biggest economic contraction since the Great Depression.
Speaking on the Today programme on Radio 4 this week, Fink said: “We are now measuring companies through a sustainability lens and determining how fast they are moving toward net carbon zero … and through that we are able to see that some companies are moving very rapidly, some companies are in denial and that’s starting to show up now in how a company’s stocks are performing.”
Fink pushed back on suggestions that BlackRock’s own portfolio, which currently includes trillions of dollars of funds invested in oil, mining and gas companies is incompatible the with net zero goal, saying that the situation is not black or white. He insisted that the focus should be on helping companies create a fast but ‘just transition’ away from fossil fuels, as well as increased public-private partnerships, with both sectors embodying long-term plans to tackle climate change. “I believe the transition is going to create an enormous number of jobs, but it’s [still] going to take time,” he insisted.
For many industry observers, Fink’s influential letter marks a tipping point in sustainable investing, a type of investment that involves putting environmental, social and governance (ESG) on equal footing with financial return — raising its profile from one of niche strategy to business imperative.
The CEO himself, head of the world's largest asset manager, with $8.67 trillion in assets, has galvanised far-reaching change in previous letters – in 2018 he called on businesses to clarify their purpose and contribution to society, prompting the Business Roundtable lobbying group of 180 of American’s most powerful CEOs to update its statement to declare that ‘corporations have a responsibility to society’, rather than merely the transaction of stockholder returns.
And as companies, investors and governments begin to truly double down on the goal of net zero emissions by 2050, the threshold necessary to keep global warming below 2ºC, it will accelerate an economic transformation, according to Fink. The appetite for a reset is there, he insists, and will only grow.
“No issue ranks higher than climate change on our clients’ lists of priorities. They ask us about it nearly every day,” he writes. “In January of last year, I wrote that climate risk is investment risk. I said then that as markets started to price climate risk into the value of securities, it would spark a fundamental reallocation of capital.
“In March, with the pandemic taking hold, the conventional wisdom was the crisis would divert attention from climate. But just the opposite took place, and the reallocation of capital accelerated even faster than I anticipated. From January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase over the whole of 2019 […] We know that climate risk is investment risk. But we also believe the climate transition presents a historic investment opportunity.”