Larry Fink, CEO of BlackRock, the world’s largest asset manager, said the proposal to the corporate sector to switch to carbon-neutral business was about profit and not about being “woke.” BlackRock will continue to encourage companies to react to climate change because it has financial significance, he stated in the annual letter for 2022, entitled The Power of Capitalism.
In the annual address, Fink reccomends to CEOs in the corporate sector the themes important for long-term stability and goals. On behalf of BlackRock, he said companies, cities, and countries that are not planning a carbon-free future run the risk of falling behind.
The links between capitalism and sustainability
“Most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonizing the global economy,” the BlackRock CEO said in a letter. Fink added the distribution of capital and companies’ long-term operations depends on how efficiently the global energy transition is going to be managed.
Scientists and engineers are working on solutions for the decarbonization of cement, steel, and plastic, the letter reads. Trucking, shipping, and aviation, as well as agriculture, energy, and construction, are undergoing a great transformation, Fink added and stressed that he believes the decarbonization of the global economy would create the greatest investment opportunity the era.
The decarbonization of the global economy is going to create the greatest investment opportunity
“It will also leave behind the companies that don’t adapt, regardless of what industry they are in. And just as some companies risk being left behind, so do cities and countries that don’t plan for the future. They risk losing jobs, even as other places gain them, ” according to his letter.
The fact is that green products often cost more today, so reducing that green premium will be essential for a peaceful and fair transition, the co-founder of BlackRock claims.
Fink: We focus on sustainability not because we are environmentalists, but because we are capitalists.
“We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients. That requires understanding how companies are adjusting their businesses for the massive changes the economy is undergoing. As part of that focus, we are asking companies to set short-, medium-, and long-term targets for greenhouse gas reductions,” Fink said.
Investments require a long-term approach
The transition to a carbon-neutral economy is moving at different speeds, he wrote. And it`s uneven with different parts of the global economy, according to Fink.
“To ensure continuity of affordable energy supplies during the transition, traditional fossil fuels like natural gas will play an important role both for power generation and heating in certain regions, as well as for the production of hydrogen,” he asserted.
In the letter, Fink says the pace of transition would be very different in developing and developed countries. But unprecedented investments in decarbonization technologies will be necessary for all markets, in his view.
The pace of transition will be very different in developing and developed countries
“And any plan that focuses solely on limiting supply and fails to address demand for hydrocarbons will drive up energy prices for those who can least afford it, resulting in greater polarization around climate change and eroding progress,” BlackRock’s chief executive warns.
Necessary sustainability strategies
BlackRock manages investment funds, and the assets it controls have just exceeded USD 10 trillion, far more than any other competitor on the planet. The management is convinced that directing capital to companies leading the transition would be essential to creating a net zero emission economy.
Fink: We need governments to ensure a consistent taxonomy for sustainability policy
“Capitalism has the power to shape society and act as a powerful catalyst for change. But businesses can’t do this alone, and they cannot be the climate police. That will not be a good outcome for society. We need governments to provide clear pathways and a consistent taxonomy for sustainability policy, regulation, and disclosure across markets, ” Fink said.
In this year’s address, Fink highlights the strategy of “stakeholder capitalism” in social issues that he says are essential for the long-term success of companies.
“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke’. It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper,” says the CEO of BlackRock.
Care for the environment is guided by care for profit
In energy transformation, shareholders and other stakeholders must keep in mind both the long-term and the broader picture. Because there is no profit without capitalism, but there is also no capitalism without society, i. e. the market.
Apparently, global investment capital intends to stay in the game through strategies for the transformation of the economy and society following the adopted international conventions on the transition to a net zero economy. We have a long-term process ahead of us in which we will witness whether, and in what way, such global shifts will preserve business, jobs, energy stability, and above all the planet as we know it.