World’s Largest Asset Manager Urges More Disclosure on Climate Change, Foresees Transition to ‘Net Zero’ Economy
According to BlackRock, the world’s largest asset manager, climate risk is investment risk. In his most recent annual letter to CEOs of the companies in BlackRock’s portfolio, BlackRock CEO Larry Fink states that “no issue ranks higher than climate change on our clients’ lists of priorities. They ask us about it nearly every day.”
Fink argues that “there is no company whose business model won’t be profoundly affected by the transition to a net zero economy – one that emits no more carbon dioxide than it removes from the atmosphere by 2050, the scientifically-established threshold necessary to keep global warming well below 2 degrees Celsius.”
Concerned that “investors cannot prepare their portfolios for this transition unless they understand how each and every company is prepared both for the physical threats of climate change and the global economy’s transition to net zero,” Fink is thus asking companies to disclose, among other things:
- a plan for how their business model will be compatible with a net zero economy and
- how this plan is incorporated into their long-term strategy and reviewed by their board of directors.
Why should companies heed Fink’s requests? An article in The New York Times Dealbook discussing Fink’s letter explains that, “when Mr. Fink makes what sounds like a request, in truth it is much more than that. BlackRock’s size gives it enormous influence: Mr. Fink can seek to oust directors of companies that he doesn’t believe are heeding his call, and he can dump the shares of companies owned by the firm’s actively managed funds.”