BlackRock chief pursues a net zero campaign in yearly letter to CEOs

Larry Fink puts pressure on companies to create a plan for net zero emission or risk losing BlackRock’s investments

“I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives… We know that climate risk is investment risk. But we also believe the climate transition presents a historic investment opportunity.”

That’s how BlackRock chief Laurence D. Fink began his yearly letter to the world’s largest CEOs. BlackRock, an investment management corporation, is arguably one of the world’s most influential investors, thereby making Fink’s power nearly unlimited in economic, social or other aspects.

In previous years, Fink’s letters have served to push large companies, like Microsoft, to become carbon-negative. However, this year, Fink demands that all the companies he invests in “to disclose a plan for how their business model will be compatible with a net-zero economy.” In essence, he is demanding a concrete plan of action and holding them accountable. 

Fink’s letter from last year had one clear message: “climate risk is investment risk.” Many of his skeptics believed that his economic, social and governance movement would quickly crumble. They argued that it was more of a marketing technique than a firm plan of action. Likewise, they stated that while companies would support this movement in times of economic prosperity, they would quickly back out in times of crisis. 

“But just the opposite took place, and the reallocation of capital accelerated even faster than I anticipated,” Fink points out, adding that he believes “that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives.” 

His firm orders are impactful and any company that doesn’t follow through risks losing BlackRock’s economic support. Just last year, in fact, BlackRock voted against 64 directors and 69 companies for their lack of focus on the climate crisis. They proceeded to put nearly 200 companies on a “watchlist.” This “voting action” is essentially voting against company boards, directors, or shareholder proposals. 

In part of the letter, Fink talks about how the goal of his movement and the goal for CEOs should be to work towards eliminating greenhouse gas emissions by 2050. Likewise, he hopes to drastically reduce global warming, placing an emphasis on achieving less than 2℃ above the pre-industrial averages.

“As the transition accelerates, companies with a well-articulated long-term strategy, and a clear plan to address the transition to net zero, will distinguish themselves with their stakeholders… But companies that are not quickly preparing themselves will see their businesses and valuations suffer,” Fink wrote in his 2021 letter. “It’s important to recognize that net zero demands a transformation of the entire economy.”

Fink believes the U.S. is quickly gaining momentum in the climate fight, much like the EU, South Korea and Japan, who all made commitments to achieving net zero emissions just last year. His letter emphasizes that 2021 will be a defining year for the global economy as the climate crisis gains recognition from large companies. 

In a separate letter from BlackRock’s Global Executive Committee, two initiatives are listed: transparency and public policy. In the former, the committee pledges to be at the same level of transparency that they ask of the companies they invest in. As a first step towards this initiative, the committee released a “TCFD-aligned and SASB-aligned report,” which lists their shareholders and outlines their strategies and targets for a sustainable future. 

In regards to public policy, the committee states that they will continue to support and “advocate for public policies that help make the financial system more resilient, sustainable, and equitable, including advancing the goal of net zero.” They list a global market for carbon offsets, global carbon pricing regimes and a “common language” as their examples of what they believe in. 

Fink’s actions are unprecedented by companies as large as his and in the end his letter served its purpose: a wake-up call to investors, CEOs and companies. By using his immense power, Fink is rapidly changing the way capitalism deals with the consequences of its actions. 

In the opinion of senior Alexandra Fine, this presents a practical and achievable solution to a prominent global issue. She is hopeful of the outcomes that Fink’s actions will bring. 

“America produces the most fossil fuels on a global scale — around 20% I think — and for someone as powerful as Fink to be doing this is huge. While I think there are many more things we can be doing nationwide, I also think this is a great start. If more companies join his campaign a lot of good changes could be made,” Fine said. 

In pursuing a path of accountability, Fink hopes to act in time to fix climate-related issues. While most of his letter presents an eye-opening image of what the world has come to and what it will continue to look like if leaders don’t step up, he ends on a positive note. 

“I am an optimist… I have great confidence in the ability of businesses to help move us out of this crisis and build a more inclusive capitalism… “[Corporate leaders] are demonstrating the power of companies – the power of capitalism – to respond to human needs,” Fink wrote in his 2021 letter. “The world is still in crisis and will be for some time. We face a great challenge ahead. The companies that embrace this challenge – that seek to build long-term value for their stakeholders – will help deliver long-term returns to shareholders and build a brighter and more prosperous future for the world.

Graphic with a cartoon Fink sitting in front of a computer. The text bubbles around him highlight parts of his 2021 letter to CEOs. The bottom part also includes a link to his letter. (Graphic by Daisy Calderon/Talon)