In his
annual letter to CEOs, BlackRock’s CEO Larry Fink noted how uneven experiences have been, both for companies and for the wider population, through the COVID pandemic. While the letter generally applauds companies for their response, Mr. Fink also explains that the pandemic offers a stark warning about the dangers of environmental damage.
Mr. Fink takes care to address the criticism that BlackRock does not do enough to keep its own house in order. Specifically, the letter highlights BlackRock’s steps, including publishing a temperature alignment metric for their public equity and bond funds while incorporating climate considerations into capital markets assumptions (including potential exits from companies carrying excessive climate risk).
To that end, BlackRock is openly advocating that companies shift to net zero carbon emissions. BlackRock is asking companies to disclose:
- How their business model will be compatible with a net zero economy;
- The role of the board in setting and reviewing the plan; and
- How the plan affects long-term strategy.
The letter acknowledges that disclosures carry costs and add complexity to shareholder communications. However, BlackRock is encouraging companies to develop disclosures now, before they are required by regulators. The investment firm is supportive of a global standard for reporting and continues to endorse Task Force on Climate-related Financial Disclosures- and SASB-aligned reporting.
Mr. Fink’s letter is less prescriptive and more high-level than State Street CEO Cyrus Taraporevala’s
letter from earlier in the month. The BlackRock letter did not highlight recommendations for including ESG metrics in compensation programs, nor did it discuss voting policies. On diversity and inclusion, the letter advocates for improved disclosure on how talent strategies reflect long-term plans to improve diversity, equity, and inclusion. BlackRock r
ecently committed to hiring 30% Black employees and doubling Black representation in management from 3% to 6% by 2024.
