The Chairman and CEO of the world’s largest asset management fund BlackRock has hailed an “evolution” in business which will favour companies helping the world decarbonise.
“The next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators,” said Larry Fink in his annual letter to CEOs. Such businesses would “make the energy transition affordable for all consumers,” he added.
Global sustainable investments reached nearly $4 trillion in 2021. Inflows to sustainable funds are set to grow further throughout this year as state-imposed disclosure rules prompt sustainable funds to expand their ESG offering, while investors continue to pile into securities with a sustainability premium.
Last year, the UN’s COP 26 climate conference shone a light on the urgent need to reduce global carbon emissions. Coupled with this, the coronavirus pandemic catalysed change in both consumer demand and the way businesses operate.
The result, according to Fink, is an entirely new business environment in which established companies must regularly re-invent themselves in order to survive. “What are you doing to disrupt your business?” Fink asked the CEOs of companies in which his fund invests. “As your industry gets transformed by the energy transition, will you go the way of the dodo, or will you be a phoenix?”
Fink also highlighted the growing importance of ESG criteria in business. In particular, he stressed the need for transparent corporate governance, observing that the fund’s own clients are showing a growing interest in the operations of the companies in which it invests. He identified this trend as part and parcel of stakeholder capitalism – the relationship between companies and their investors which spurs them on in their pursuit of growth – and urged companies to listen to investors’ demands.
Fink called on CEOs to give stakeholders a greater say in decisions and to issue environmental reports consistent with the Task Force on Climate-related Financial Disclosures (TCFD). He suggested that ESG policies not only advance responsible business and the green agenda, but have also become prerequisities for the delivery of value and growth.
Fink announced that BlackRock will launch a Center for Stakeholder Capitalism, which will serve as a forum for research, dialogue, and debate about the relationship between businesses and their investors and clients.
