CEO Larry Fink sees ‘a fundamental reshaping of finance’

CEO Larry Fink sees ‘a fundamental reshaping of finance’

In his annual letter to CEOs, the BlackRock chief executive writes: “Climate change has become a defining factor in companies’ long-term prospects.”

Larry Fink, CEO of the world’s largest money manager, wrote in his annual letter to corporate executives: “Climate change has become a defining factor in companies’ long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance (…) And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”

The chief executive of one of the biggest holders of most U.S. also outlined a series of initiatives that highlighted strengthening BlackRock’s commitment to sustainability and cutting investment ties with high sustainability-related risk companies, which suggests a shift in the company’s assets that totaled almost $7 trillion in the third quarter of 2019, according to its latest financial results.

“Even when other financial problems lasted for many years, they were all, in the broad scheme of things, short-term in nature. Climate change is different.” (…) Investors are asking how they should modify their portfolios (…) “And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself (…) In the near future — and sooner than most anticipate — there will be a significant reallocation of capital.”

Fink’s letter come as business leaders, policymakers and investors prepare to travel to Davos, Switzerland for the World Economic Forum’s 50th annual forum to be held 21-24 January. It also arrives just days after BlackRock joined Climate Action 100+, an influential pressure group with a combined $35 trillion in assets calling for the biggest polluters to reduce their emissions.

In previous years he’s underscored the theme that profit and social purpose are inextricably linked, reported Fortune, “people are looking to corporate executives to step in and offer fixes to social problems that governments are failing to solve”, Fink wrote in last year’s letter.

Questioning BlackRock

Activists have been calling on BlackRock to do more around the climate crisis.

According to Fortune, coalitions of youth activists and other groups and firms have all targeted the firm demanding more action for climate change, accusing it of passive management despite becoming the world’s largest and most trusted manager of other people’s money. Environmental groups like Extinction Rebellion claimed BlackRock’s statement would make little difference and said “the world’s biggest miners and polluters will not be losing any sleep” over the announcement. “BlackRock remains waist-deep in fossil fuel investments and the world’s top backer of companies that destroy the Amazon rainforest and ignore the rights of indigenous people,” it added.

According to reporting form The Guardian, Fink’s announcement was welcomed by groups critical of BlackRock’s environmental credentials. “Putting climate change at the absolute centre of its business is the way every company should respond to this planetary emergency,” said Diana Best, of the Sunrise Project, which supports groups campaigning against the climate crisis.

2020-02-04T15:12:28+00:00

About the Author:

Pablo Hernandez
Community Manager and Senior Reporter for CEO Magazine. Write to Pablo at pablo.hernandez@ceo-latam.com
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