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Laurence D. Fink, the visionary CEO of BlackRock Inc., writes a letter every January to the CEOs of the public companies in which BlackRock invests its nearly $7 trillion in assets under management. It is a highlight of the year for me, because Fink seems to be one of the few people whose words can get the attention of stakeholders across our painfully polarized political landscape, and he is always — always — looking far out onto the horizon.
He doesn’t always get immediate buy-in. Fink has for years now been begging and cajoling corporate managers to stop bowing to “the powerful forces of short-termism”; last year the Business Roundtable finally adopted a new statement on the purpose of a corporation that puts customers, employees, supplies and communities on the same level as shareholders. It remains to be seen whether that is mere lip service, but Fink himself was a signer of the new statement, and it is much more in line with his philosophy on long-term corporate sustainability.
This is an Opinion
In the letter he released last week, Fink takes on another long-term issue, one that has become ridiculously fraught with political tension: climate change. And he did it without flinching or dodging. Instead, he treated it as matter-of-factly as any other well-identified and urgent business risk:
“The evidence on climate risk is compelling investors to reassess core assumptions about modern finance,” Fink wrote. “Research from a wide range of organizations — including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others, including new studies from McKinsey on the socioeconomic implications of physical climate risk — is deepening our understanding of how climate risk will impact both our physical world and the global system that finances economic growth.”
Fink’s business-centric appeal reminded me of Darrin Williams, CEO of Southern Bancorp and one of our state’s most prominent African American businessmen, who said, “The business case for diversity will do more than the moral case.” The business case for climate risk management may well do more than any scientific or political case.
Fink acknowledged crises and challenges he has witnessed in a 40-year career — “the inflation spikes of the 1970s and early 1980s, the Asian currency crisis in 1997, the dot-com bubble, and the global financial crisis” — and declared that “climate change is different.”
“Even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis. Companies, investors, and governments must prepare for a significant reallocation of capital,” he wrote, with the last sentence in boldface type.
Government action, he said, “will generally define the speed with which we move to a low-carbon economy,” and it will require “a coordinated, international response from governments, aligned with the goals of the Paris Agreement.” (Yes, the one that the U.S. is set to exit the day after the presidential election.)
Fink did more than just ask CEOs to think strategically about climate risk. He referred them to a letter that BlackRock sent to its clients on the same day announcing that sustainability in the face of “the global transition to a low-carbon economy” would be a factor in BlackRock investment decisions.
“Because sustainable investment options have the potential to offer clients better outcomes, we are making sustainability integral to the way BlackRock manages risk, constructs portfolios, designs products, and engages with companies. We believe that sustainability should be our new standard for investing,” the company told clients. That last sentence was in boldface type, too.
If I’m reading this right, BlackRock won’t be betting on climate change denialists — or on companies that refuse to plan for a future economy that is different from the one we’re all accustomed to.
On the same day that Larry Fink gave the corporate world notice that BlackRock money would follow sustainability, the man who decided that the world’s largest economy would not be bound by the Paris Agreement continued his assaults on sustainability.
At a rally in Milwaukee, President Trump criticized modern plumbing, lightbulbs and kitchen appliances. His earlier suggestion that toilets have to be flushed “10 times, 15 times” could be dismissed as a silly exaggeration, but the idea that dishwashers have to be run repeatedly is fact-free performance art.
We recently replaced a 1980 toilet at Chez Moritz, and the new one flushes better than the old one. My dishwasher — nothing fancy — cleans dishes just fine. And one of my life’s great regrets is that it took me so long to replace the original fluorescent light fixtures in the kitchen, laundry room and garage with LEDs.