BlackRock’s Larry Fink Sets a Bolder Climate Goal in Annual Letter
He also said that the firm planned to publish “a temperature alignment metric for our public equity and bond funds, where sufficient data is available” and that it would start new products “with explicit temperature alignment goals, including products aligned to a net-zero pathway.”
Business & Economy
This could have the same effect for investors as a calorie count on a menu for diners, a nudge toward making more informed choices. In the future, big public pension funds and other investors could have firms like BlackRock create custom indexes for them based on such data. On Monday, New York City’s pension fund said it would divest $4 billion in fossil fuel-linked assets in its portfolios.
These sorts of actions won’t sacrifice investment performance, Mr. Fink said. Sustainable funds outperformed the market last year, he noted, especially during the worst moments of the pandemic downturn. “The more your firms are seen to embrace the climate transition and the opportunities it brings, the more the market will reward your firms with higher valuations,” he wrote in the letter to C.E.O.s.
Mr. Fink’s call for greater transparency on climate risks isn’t happening in a vacuum. In the past year, as his letter points out, the European Union, China, Japan and South Korea all made commitments toward a net-zero future. And following President Biden’s inauguration, his recent executive order to rejoin the Paris Climate Agreement and plan to unveil a new climate initiative on Wednesday that includes banning new oil and gas drilling on federal land, it appears that governments could soon force the issue of corporate climate risk disclosures.
“I urge companies to move quickly to issue them rather than waiting for regulators to impose them,” Mr. Fink wrote about companies disclosing their net-zero plans. And his disclosure push isn’t just for public companies.
“If we want these disclosures to be truly effective — if we want to see true societal change — they should be embraced by large private companies as well,” he added. “We believe that issuers of public debt also should be disclosing how they are addressing climate-related risks.”
Already, several organizations are trying to create a uniform standard for climate disclosure. A group called the Task Force on Climate-Related Financial Disclosures is jockeying with the Sustainability Accounting Standards Board to become the global standard, while a group within the World Economic Forum led by the Bank of America chief Brian Moynihan is announcing its own disclosure standard for E.S.G. on Tuesday. Mr. Fink, rightly, says there should be only one standard, and he has put his support behind the Task Force.