- BlackRock Chairman and CEO Larry Fink has become a major advocate for pushing company boards to execute on climate change initiatives
This year, BlackRock Chairman and CEO Larry Fink has become a major advocate for pushing company boards to execute on climate change initiatives.
In an annual letter to CEOs that was recently posted on the BlackRock website, Fink has been forecasting a fundamental shift in finance and pointed out that companies could face anger from investors about the lack of unsustainable business practices. BlackRock currently holds two-thirds of its $7 trillion of assets in index products.
And Fink also pointed out that BlackRock would be “increasingly disposed” for casting critical proxy votes linked to sustainability. In a separate letter to clients, BlackRock said it would sell off stakes in companies that derive over 25% of revenues from thermal coal production.
“Climate change has become a defining factor in companies’ long-term prospects,” added Fink in the annual letter. “Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Climate change activists praised Fink’s stance on the initiative and said this would also put pressure on BlackRock’s rivals to match sustainability goals.
According to an analysis by Reuters in October, the top index managers rarely challenge company management and largely opposed climate change proposals. For example, BlackRock and Vanguard only backed around 10% of climate-related shareholder resolutions in 2018 and 2019. But BlackRock said that it lobbies corporate executives behind the scenes.
Investors have been putting more money into climate-friendly funds. The new deposits in sustainable funds have grown to $20 billion, according to data by Morningstar. This figure is about four times the previous year.
“More and more clients are looking for a more sustainable portfolio,” added Fink in an interview with CNBC. In the interview, Fink said that companies should also make more disclosures promoted by certain standards like the Sustainability Accounting Standards Board.
BlackRock plans to double its lineup of sustainable exchange-traded funds to around 150. And the investment firm plans to pressure index providers to set up sustainable versions of their flagship indexes, according to sources with Bloomberg.
