Larry Fink, CEO of the world’s largest asset manager has warned companies they will find access to capital more expensive if they do not decarbonise. Eventually, they may not get it at all.
At the start of each year, the Blackrock CEO, who oversees $7tn worth of assets, largely pensions funds, writes to CEOs of some of the world’s largest companies.
In recent years, the message has been consistent: Sustainable investment is key to long term, stable growth required by pension funds. Failure to invest in a sustainable society will create instability, societal and financial.
Blackrock is backing up words with action and holding directors accountable. Last year it voted against, or withheld votes from 4,800 directors at 2,700 companies.
In his letter to CEOs, Fink warned it will wield a bigger stick.
“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. Given the groundwork we have already laid engaging on disclosure, and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
He warned that the money will dry up for firms that do not embed sustainability at their core. For those that embrace a sustainable approach, money will be easier to come by, and cheaper, said Fink.
“Over time, companies and countries that do not respond to stakeholders and address sustainability risks will encounter growing scepticism from the markets, and in turn, a higher cost of capital. Companies and countries that champion transparency and demonstrate their responsiveness to stakeholders, by contrast, will attract investment more effectively, including higher-quality, more patient capital.”
Describing climate change as the “ultimate long-term problem”, Fink said it is imperative for everyone to mitigate the existential threat.
“We don’t yet know which predictions about the climate will be most accurate, nor what effects we have failed to consider. But there is no denying the direction we are heading. Every government, company, and shareholder must confront climate change.”
Leading corporates, councils and universities will share their decarbonisation plans at the Energyst’s free ‘Delivering Net Zero’ conference and exhibition, 22-23 April, Silverstone. Details here.