Companies Must Step Up to Tackle Climate Change, Says Larry Fink
Dealing with the challenge “requires real long-term planning,” Fink said.
(Bloomberg) -- Government institutions can’t solely address climate change, placing a burden on companies to help deal with the issue, BlackRock Inc.’s Chief Executive Officer Larry Fink said.
Dealing with the challenge “requires real long-term planning,” Fink said in an interview with Bloomberg News editor-in-chief John Micklethwait. That doesn’t suit many governments, which operate on two-or four-year cycles, he said.
“Climate change is not going to be fixed by a central bank,” Fink said at the World Economic Forum in Davos.
Last week Fink warned corporate America that the global climate emergency will upend business sooner than many leaders expect. He outlined a plan for BlackRock to adopt climate considerations into managing its $7 trillion in client assets. He wrote that “every government, company and shareholder must confront climate change,” and that corporations will need to reveal more information about their climate-related risks.
His message arrived against the backdrop of Australia’s catastrophic wildfires, which ravaged a combined area twice the size of Switzerland. Last year was the second hottest on record in 140 years of data.
Fink also said that climate change will be a disruptive force that could have social implications. The potential for insurance costs to rise against disasters like flood and fire could add further strain to cash-strapped households, for example, while carbon taxes can be regressive.
“We have to be thoughtful with the solutions,” he said. “We understand the societal impact.”
BlackRock also said last week that it would incorporate sustainability into its investment processes. While that will include divesting from stocks and bonds of thermal coal producers in its actively-management funds, it will be more difficult to apply the considerations to its suite of passive investments, which hold close to $5 trillion in assets.
Fink said that BlackRock’s role as a fiduciary -- safeguarding client assets -- plays into its approach to decision-making. For example, it couldn’t legally pull client funds from all fossil fuel producers in funds which track indexes that include those companies.
“It’s not my money,” Fink said. “If a client gives me a contract to invest in the S&P 500 Index,” he said, the firm couldn’t invest it in “the S&P 497.”
The firm said it will double its number of sustainable exchange-traded funds to 150 and pressure index providers to create more environmental, social and governance-related benchmarks.
Fink’s climate proposals followed a year in which activists and non-profits railed against BlackRock for what they called a lax attitude toward climate change.
To contact the reporter on this story: Annie Massa in New York at amassa12@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Alan Mirabella
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