BlackRock's Larry Fink warns CEOs that 'no issue ranks higher than climate change'
BlackRock's chief executive Larry Fink has written to businesses to warn them that "no issue ranks higher than climate change" and that the current coronavirus pandemic serves as a "stark reminder" of the need to drastically combat climate-related risks.
Fink’s annual letter to the chief executives of companies in which BlackRock invests in notes that a “tectonic shift” to sustainable investment is accelerating as nations and investors driver towards a net-zero economy.
“I began writing these letters in the wake of the financial crisis,” Fink wrote in the letter. “But over the past year, we experienced something even more far-reaching – a pandemic that has enveloped the entire globe and changed it permanently. It has both exacted a horrific human toll and transformed the way we live – the way we work, learn, access medicine, and much more.
“I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives. It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response.”
The letter summarised that the current pandemic has actually accelerated efforts to transition to a sustainable economy and that the net-zero transition will offer plenty of opportunities for businesses that are proactive in the green agenda.
Specifically, the letter states that companies that “have a well-articulated long-term strategy to address the energy transition” will be able to “distinguish themselves with their stakeholders” as the net-zero transition envisioned by global governments starts taking shape.
To ensure that investors are active in this transition, the letter also notes the importance of data and disclosure in articulating corporate efforts to respond to the climate crisis. Fink also claimed that BlackRock would support moving to a single global standard for climate-related disclosure so investors can better analyse current and potential finance portfolios.
Fink also claimed that the more a company can highlight its purpose in society by delivering value through customer, employees and communities, the more long-term profits it would produce from investors while also greatly improving resiliency.
“As we move forward from the pandemic, facing tremendous economic pain and inequality, we need companies to embrace a form of capitalism that recognises and serves all their stakeholders,” Fink added.
Net-zero for BlackRock
BlackRock has warned that high-level directors could be voted out of companies that are failing to act on climate risks posed to individual firms. BlackRock has historically faced criticism over its handling of the sustainability performance of the firms it invests in. However, it joined Climate Action 100+ last year and had taken voting action against 53 companies on climate grounds. It has also identified more than 150 other companies which it invests in as laggards on climate and has warned them of potential voting action in the future.
In addition to Fink’s annual letter, BlackRock has also issued a letter to its clients outlining a new series of commitments to help the investor align with a net-zero world.
Specifically, BlackRock has announced that an interim target on the proportion of its assets that will be aligned to net-zero by 2030 will be set later this year.
The letter also pledges to implement a “heightened-scrutiny model” to manage securities that pose significant climate risk. BlackRock will also launch new products that have “temperature alignment goals” including one consistent with a net-zero pathway. A temperature alignment metric for public equity and bond funds will also be published.
More votes will be cast on shareholders proposals to ensure that external contributions can be made to BlackRock’s sustainability commitments.