By Steve Goldstein
With $10 trillion in funds under management — though mostly in index funds — BlackRock’s views get more attention in the board room than other investors.
In his annual letter to CEOs, BlackRock /zigman2/quotes/207946232/composite BLK +1.84% CEO Larry Fink said executives need to express their values. “They don’t want to hear us, as CEOs, opine on every issue of the day, but they do need to know where we stand on the societal issues intrinsic to our companies’ long-term success,” said Fink.
“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,” he said.
Companies are having an increasingly difficult time navigating a more polarized America. In a survey of government relations executives and political action committees by the Conference Board, 77% said the frequent emergence of new social and political issues on which companies faced pressures to take a stand made the environment for political contributions and lobbying challenging. Only a third, however, worried about investors.
Employees, customers and shareholders, says Fink, “will be more likely to support you in difficult moments if they have a clear understanding of your strategy and what is behind it.”
On a different note, Fink said new sources of capital are fueling market disruption. “It means that virtually every sector has an abundance of disruptive startups trying to topple market leaders,” said Fink. “CEOs of established companies need to understand this changing landscape and the diversity of available capital if they want to stay competitive in the face of smaller, more nimble businesses.”
He also addressed climate risk, a point Fink has been making the last two years. Sustainable investing is now a $4 trillion asset class, he noted. “This is just the beginning – the tectonic shift towards sustainable investing is still accelerating. Whether it is capital being deployed into new ventures focused on energy innovation, or capital transferring from traditional indexes into more customized portfolios and products, we will see more money in motion,” said Fink.
Fink said the next 1,000 unicorns — the term for startups worth at least $1 billion — will “help the world decarbonize and make the energy transition affordable for all consumers.”
Environmental groups pointed out Fink did not call for new climate action, however, unlike a previous letter where he introduced a coal exclusion policy . “There’s not much to see here other than more hot air from a would-be climate leader. Larry Fink’s latest letter to CEOs is just another rehashing of the same vague rhetoric, without any meaningful new commitment to actually help lead the necessary transition to a climate-safe future,” said Ben Cushing, fossil-free campaign manager with the Sierra Club, in a statement.
Fink said BlackRock will expand its offering of allowing some institutional clients, such as pension funds, proxy votes. “We are committed to a future where every investor – even individual investors – can have the option to participate in the proxy voting process if they choose,” said Fink.