Burning, deforestation, unseasonal hurricanes, devastating floods, severe droughts... Climate events are always in the news. Sustainability has become the central theme of all issues, including economic ones.
"We are on the verge of a structural change in finance"says BlackRock CEO and Chairman Larry Fink in his annual letter to CEOs of companies that receive investments from the world's largest asset manager. Larry carries with him the responsibility of someone who manages more than $6 trillion in assets under management. "The evidence on climate risk is forcing investors to reassess basic assumptions about modern finance," he added.
The words that shook the investment world came not from the environmentalist Larry, but from the capitalist. He warned corporate boards to step up efforts to combat climate emergencies, marking a significant shift in BlackRock's public stance amid growing concerns about global warming.
In his annual letter to CEOs, Fink said investors are concerned about how unsustainable business practices may limit their future wealth. And he stressed that BlackRock will exit investments that present high sustainability-related risk, including coal producers, as it participates in what he described as a "fundamental rethinking of finance."
Companies that still want to count on investments from the funds must pay attention to the need to consider environmental, social, and governance (ESG) dimensions in their business models.
Fink scores three essential points:
- Climate risk is an investment risk: BlackRock will deepen the integration of sustainability into investment management and risk management platforms; expand sustainable offerings for investors; and increase the focus on sustainability in governance and stewardship activities. "We believe sustainability should be our new investment standard. BlackRock plans to make sustainability as "our standard offering in solutions."
- Greater transparency for shareholders: "In the future, greater transparency on sustainability issues will be a persistently important component of each company's ability to attract capital. It will help investors assess which companies are serving their shareholders effectively and reshape the flow of capital accordingly," he determined.
- Responsible and transparent capitalism: "The goal cannot be transparency for transparency's sake. It must be a means to achieve a more sustainable and inclusive capitalism. Companies must be deliberate and committed to embrace purpose and serve all stakeholders - their shareholders, customers, employees, and the communities where they operate," the CEO wrote.
The large funds expect to invest in companies with active ESG plans, that adopt certified raw materials and suppliers, have good water resources management, opt for renewable energy, create inclusion programs, with equal gender pay and opportunities, invest in employee training and in the communities where they operate, be transparent and respect the rights of employees, suppliers and consumers, acting with social responsibility.
