World’s largest investor: We want companies with long-term sustainability plan

In a letter to chief executives at ‘S&P 500’ companies and large European corporations, Blackrock’s Larry Fink warned that investors were looking for firms with sustainable long-term strategies in place.

Fink wrote: “Generating sustainable returns over time requires a sharper focus not only on governance, but also on environmental and social factors facing companies today.

“These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business – even when the world’s political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord.

“Over the long-term, environmental, social and governance issues – ranging from climate change to diversity to board effectiveness – have real and quantifiable financial impacts.

“At companies where ESG issues are handled well, they are often a signal of operational excellence. BlackRock has been undertaking a multi-year effort to integrate ESG considerations into our investment processes, and we expect companies to have strategies to manage these issues. ”

Just last week, funds controlled by Blackrock bought shares in three UK windfarms in a deal worth £423m. Blackrock itself now controls around $4.6trn in assets.

Transition

The environmental focus of the world’s largest investor is symptomatic of a shift in the finance sector as a whole. Also announced last week, investors responsible for more than $8trn called on mining giants Anglo American, Glencore and Rio Tinto to be more transparent over the climate risks and impacts of their businesses.

The movement was organised by the Aiming for A coalition of investors which filed two similar successful resolutions focusing on climate change with BP and Shell last year.

The influence of investors on companies should not be underestimated – CDP’s Carbon Action initiative claims to have generated 641 million tonnes of carbon savings through investors engaging with companies.

The programme saw investors worth $22trn ask companies to help tackle climate change in three ways: making emissions reductions; publicly disclosing emissions reduction targets; and investing in emissions-reduction projects with a positive return.

In an effort to scale up this type of initiative, the G20 finance watchdog launched a taskforce during COP21 that aims to make company ESG data more easily available to investors.

Brad Allen