I FINK 2021 WILL BE A BIG YEAR FOR CLIMATE ACTION

This article looks into the recently released letter that Larry Fink, the CEO of Blackrock sent to CEO’s of all the companies they invest in.

This is an annual event, but in recent years Larry Fink has started to really turn up the volume in his calls for climate action. You can find the letter here.

In this year’s edition, climate change and sustainability made it into the second paragraph, which is impressive:

“This is why I write to you each year, seeking to highlight issues that are pivotal to creating durable value – issues such as capital management, long-term strategy, purpose, and climate change. We have long believed that our clients, as shareholders in your company, will benefit if you can create enduring, sustainable value for all of your stakeholders.”

Not much further into the letter, there was another ringing endorsement of climate action:

“No issue ranks higher than climate change on our clients’ lists of priorities. They ask us about it nearly every day.”

In a section titled The Opportunity of the Net Zero Transition Larry Fink has this to say:

As the transition accelerates, companies with a well-articulated long-term strategy, and a clear plan to address the transition to net zero, will distinguish themselves with their stakeholders – with customers, policymakers, employees and shareholders – by inspiring confidence that they can navigate this global transformation.”

Then in another section titled Why Data and Disclosure Matter he had this to say:

“Given how central the energy transition will be to every company’s growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net zero economy – that is, one where global warming is limited to well below 2ºC, consistent with a global aspiration of net zero greenhouse gas emissions by 2050. We are asking you to disclose how this plan is incorporated into your long-term strategy and reviewed by your board of directors.”

There is another similar letter that goes out to clients on the same day. You can find that letter here.

In the letter Larry Fink sets out the following actions:

  • Publishing a temperature alignment metric for our public equity and bond funds, where sufficient data is available
  • Incorporating climate considerations into our capital markets assumptions
  • Implementing a “heightened-scrutiny model” in our active portfolios as a framework for managing holdings that pose significant climate risk (including flagging holdings for potential exit)
  • Launching investment products with explicit temperature alignment goals, including products aligned to a net zero pathway
  • Using stewardship to ensure that the companies our clients are invested in are both mitigating climate risk and considering the opportunities presented by the net zero transition

Taken together these letters constitute a clarion call for climate action from the Chairman and CEO of the world’s largest asset manager.

BlackRock’s size gives it the ability to influence climate action like no other company can. This can include anything from voting against directors that they do not believe are adequately addressing climate change. To ousting directors and dumping shares of the same companies.

Money talks and nobody manages as much of it as Blackock.

What you need to know

This article looked into Larry Fink’s 2021 letter to CEOs.

These normally include a call for climate action, but this year, the volume got turned up significantly.

The letter includes the following key takeaways.

Climate action was earmarked as a clear client priority.

Climate action and sustainability are a precursor to success, not a burden.

Companies that Blackrock invest in need to have a plan to achieve net zero emissions by 2050.

The next time you hear someone talking negatively about climate action and sustainability, show them his letter.

Thank you for reading,

By Barnaby Nash

Please share your thoughts in the comments section below or reach out to me on social media. What do you think needs to be done to make net zero 2050 a reality?

 Let’s stay connected

I can be reached on LinkedIn and on Twitter @FollowBarnaby

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