The big news this week for sustainability professionals: The publication of the much-anticipated annual letter to corporate chief executive officers by Larry Fink, Chair and CEO of BlackRock -- the world’s largest asset manager (with almost US7 trillion in Assets Under Management).
Every year CEO Fink as fiduciary for his firm’s clients communicates the firm’s positions on key issues -- and signals the steps ahead as BlackRock enhances its sustainable investing actions as influential global fiduciary.
This week the 2020 annual letter to corporate CEO’s describes what is headlined as “A Fundamental Reshaping of Finance”. The focus is on climate change – a defining factor in companies’ long-term prospects, explains Mr. Fink.
About the impact of climate change on investors: “Awareness is rapidly changing, and I believe we are on the edge of a fundamental re-shaping of finance.” Consider some quotes from the letter:
“In the near future – and sooner than most anticipate – there will be a significant re-allocation of capital.”
“Climate risk is investment risk.”
“As I have written in past letters [to CEOs in 2019, 2018] a company cannot achieve long-term profits without embracing purpose and considering the needs of considering the needs of a broad range of stakeholders. Ultimately, purpose is the engine of long-term profitability.”
“Every government, company, and shareholder must confront climate change.”
Separately the BlackRock CEO wrote to the firm’s investor clients; he communicated to the corporate CEOs what he is saying about BlackRock actions that will affect them.
Such as: sustainability will be integral to BlackRock’s portfolio construction and risk management; certain investments will be exited (those presenting high sustainability-related risk, such as coal producers). There will be new investment products that screen fossil fuels and strengthen BlackRock’s commitment to sustainability and transparency in its investment stewardship activities.
“Over time,” CEO Larry Fink posits, “companies and governments that do not respond to stakeholders and address sustainability risks will encounter growing skepticism from the markets, and in turn, a higher cost of capital. Companies and countries that champion transparency and demonstrate responsiveness…by contrast, will attract investment more effectively, including higher-quality, more patient capital.”
BlackRock was a founding member of the Task Force on Climate-related Financial Disclosures (the TCFD) and is a signatory of the UN PRI as well as the Vatican’s 2019 statement advocating carbon pricing regimes. CEO Larry Fink is one of the signatories of The Business Roundtable’s statement on corporate purpose. BlackRock has just joined the Climate Action 100, a coalition of almost 400 investment manager managing US$40 trillion in AUM.
There’s a volume of important information for both corporate boards and executives and sustainable investing professionals in the 2020 Larry Fink letter to CEOs of companies in BlackRock’s portfolio.
This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.
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