A fundamental reshaping of finance

In his annual letter to CEOs around the world, Larry Fink (chair and CEO of the world’s largest investment company, BlackRock) says that climate change will cause a transformational reallocation of capital towards sustainable investments and would bring about a fundamental reshaping of finance – ultimately helping achieve a more sustainable and inclusive capitalism for greater longer-term prosperity.

Key points in Fink’s letter include:

• Equating climate risk to investment risk and announcing that BlackRock would place sustainability at the centre of its investment approach, for example exiting investments in coal production.
• Re-iterating the importance of stakeholder interests and embracing purpose as ‘the engine of long-term profitability.’
• Asking that companies it invests in improve disclosures and report:
  • sustainability information in line with the Sustainability Accounting Standards Boards (SASB) guidelines; and
  • climate related risks in line with Taskforce on Climate Related Disclosures (TCFD) recommendations.
• Giving notice that if companies don’t effectively address material issues it will hold directors and management accountable (by voting against them).

Fink concludes that the climate crisis is fundamentally different to the various financial crises and challenges of the past 50 years and that ‘companies, investors and governments must prepare for a significant reallocation of capital’ including in response to the increasing demands of the next generation for more transparency and action in order to achieve a more sustainable and inclusive capitalism. 

Larry Fink’s letter is available at blackrock.com