Story at a glance

  • Larry Fink, BlackRock CEO, pledged to help guide investors toward environmentally friendly investments.
  • He said businesses that adapt to net-zero emissions goals will be more profitable.

The CEO of the largest asset management firms in the world is calling on chief executives around the world to develop and disclose sustainability plans to ensure leading companies can support a sustainable future.

BlackRock leader Larry Fink penned his annual letter to CEO stakeholders, encouraging fellow business leaders to work on adapting their industry practices to reduce their greenhouse gas emissions and help halt climate change.

Fink explains that among the societal ills the COVID-19 pandemic laid bare, urgency surrounding action toward reducing carbon emissions needs to be reinvigorated as the pandemic rages on.

“In the past year, people have seen the mounting physical toll of climate change in fires, droughts, flooding and hurricanes. They have begun to see the direct financial impact as energy companies take billions in climate-related write-downs on stranded assets and regulators focus on climate risk in the global financial system. They are also increasingly focused on the significant economic opportunity that the transition will create, as well as how to execute it in a just and fair manner,” Fink explains. “No issue ranks higher than climate change on our clients’ lists of priorities.”

Fink further explains that analysts saw a 96-percent increase in investment in sustainable assets between 2019 and 2020 and that this represents a burgeoning trend that will guide BlackRock’s asset managers to make investment portfolios more sustainable and climate-friendly. 

For these investments to count, however, Fink emphasizes companies' needs to prepare their operations for transitioning from a carbon-dependent economy to a new zero emissions.

“While the transition will inevitably be complex and difficult, it is essential to building a more resilient economy that benefits more people,” he said. “I have great optimism about the future of capitalism and the future health of the economy – not in spite of the energy transition, but because of it.”

BlackRock’s own company shift will focus on investing on socially and environmentally-conscious funds and ultimately reach net-zero greenhouse gas emissions by 2050. To make its clients’ investment choices easier, it will also update its data collection and implement a new “Heightened Scrutiny Model” to gauge the environmental risk that could devalue specific portfolios. 

Also pledging enhanced disclosure on sustainability practices, BlackRock will give their clients an easy view into which companies are less susceptible to climate-related change, and thus a better investment.

“By examining carbon emissions intensity and other measures in the new CMAs, we believe the transition will reward companies, sectors, and regions that adjust and penalize others, creating opportunities for investors,” Fink concludes.

Published on Jan 26, 2021