Chairman and chief executive of global investment manager BlackRock,Larry Fink, last week told business leaders to expect “a significant reallocation of capital” in the near future as climate change rockets up the investor agenda.
In a letter to client chief executives, Fink (pictured) reiterated his call for companies to embrace ‘purpose’ and consider the needs of a broad range of stakeholders as a route to sustainable operation: “Ultimately, purpose is the engine of long-term profitability,” he wrote. He warned those who lag on this agenda to expect to repel investors and encounter a higher cost of capital.
BlackRock itself announced a number of initiatives for sustainable investment, including making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening its commitment to sustainability and transparency in its investment stewardship activities.
The latter included this year asking the companies BlackRock invests in to publish a disclosure in line with industry-specific Sustainability Accounting Standards Board guidelines by year-end and to disclose climate-related risks in line with the Task Force on Climate-related Financial Disclosures recommendations. Fink warned: “In the absence of robust disclosures, investors, including BlackRock, will increasingly conclude that companies are not adequately managing risk.”
Fink also warned BlackRock would hold board members accountable for shortcomings, and that it could cease to support them: “We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.” Last year BlackRock voted against or withheld votes from 4,800 directors at 2,700 different companies.
Fink said “every government, company, and shareholder must confront climate change” adding: “The need is particularly urgent for cities, because the many components of municipal infrastructure – from roads to sewers to transit – have been built for tolerances and weather conditions that do not align with the new climate reality,”