The founder and CEO of BlackRock, one of the world’s largest investment firms, has said in a letter to CEOs that he will use its power to ensure “every government, company, and shareholder must confront climate change.”
Larry Fink wrote about his concerns in an annual letter to leaders of businesses BlackRock invests in. He said: “…we believe that when a company is not effectively addressing a material issue, its directors should be held accountable.”
Fink wrote that over the next year, the company would start taking measures such as “making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening our commitment to sustainability and transparency in our investment stewardship activities.”
The company said that over the last year it voted against or withheld votes from 4,800 directors at 2,700 different companies. To avoid BlackRock intervening, Fink asked investees to adopt reporting standards set out by the Sustainability Accounting Standards Board by the end of the year.
He also said climate-related risks should be evaluated and reported using a framework formulated by the Task Force on Climate-related Financial Disclosures, of which BlackRock is a member.
“Where we feel companies and boards are not producing effective sustainability disclosures or implementing frameworks for managing these issues, we will hold board members accountable,” Fink said.
Without better disclosure, Fink said investors such as BlackRock would “increasingly conclude that companies are not adequately managing risk.”
He said: “…With the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for [BlackRock’s] client portfolios going forward.”
An FAQ document included with the letter said: “physical risks associated with climate change and impacts from a transition to a low-carbon economy are not fully reflected in asset prices.”