BlackRock Chairman and CEO Lawrence “Larry” Fink pauses as he speaks at the BlackRock Asia Media Forum in Hong Kong, China.
Justin Kim | Bloomberg | Getty Images
asset managers like black stone Not “Environmental Police,” Larry Funk in his Annual Chairman’s Message To Investors, released Wednesday.
“As I have emphasized for years, it is governments that should be setting policy and enacting legislation, not corporations, including asset managers, acting as environmental policemen,” Fink wrote.
But BlackRock takes its role as client fiduciary very seriously, and the letter makes that clear. Doing this well requires BlackRock to monitor the risks climate change poses to financial assets.
“Long-term investing requires taking a long-term view of factors that affect returns, including demographics, government policies, technological advances, and the transition to a low-carbon economy,” Fink wrote.
“We’ve treated climate risk as an investment risk for years. That’s still the case,” Fink said.
Fink Has Been Targeted by Republican Lawmakers They see environmental, social and governance (ESG) investing as a representation of financiers expressing their political views.
For example, in August 2022, Texas Comptroller Glenn Hegar targeted BlackRock, adding the asset manager to a list of financial firms “Boycott energy companies.”
“Anyone can see the impact”
In his annual letter, Fink highlighted the ways climate change is already affecting financial markets and the economy.
“Anyone can see the effects of climate change in natural disasters in California or Florida, Pakistan, Europe and Australia and many other places around the world. There are more floods, more wildfires and more violent storms. In fact , it’s hard to find a part of our ecology — or our economy — that hasn’t been affected,” Fink wrote. “The financial sector is not immune to these changes. We are already seeing insurance costs rise in response to changing weather patterns.”
Natural catastrophes will cost insurance giant Munich Re $120 billion in 2022, a figure Fink called “once unimaginable.”
The federal government’s National Flood Insurance Program, which underwrites many of Florida’s policies, has $20.5 billion in liabilities and has had to borrow money from the U.S. Treasury Department, Fink said.
Blackrock has clients who want to invest in the energy transition and those who don’t, and Blackrock serves both types, Fink said. But if clients want to understand how climate risk will affect their investments, BlackRock will provide that information.
I wrote last year that the next 1,000 unicorns won’t be search engine or social media companies. Many of them will be sustainable, scalable innovators—startups that help decarbonize the world and make the energy transition affordable for all consumers. I still believe that.
CEO of BlackRock
“It is not the job of asset managers like BlackRock to engineer a particular outcome in the economy, and we don’t know the ultimate path and timing of the transition. Government policy, technological innovation and consumer preferences will ultimately determine the pace and scale of decarbonisation,” Finn said. K wrote. “Our job is to think through and simulate different scenarios to understand the impact on our clients’ portfolios.”
That’s why Fink is pushing companies to disclose climate risks. More than half of the S&P 500 components voluntarily report their Scope 1 and 2 emissions, Fink said.
Scope 1 emissions are greenhouse gases from assets owned or controlled by the organization, such as boilers, furnaces, or vehicles, according to US Environmental Protection Agency. Scope 2 emissions are greenhouse gas emissions associated with an organization’s use of electricity, steam, heat or cooling.
Scope 3 emissions, which are more difficult to track, are those generated by assets in an organization’s supply chain.
While Fink advocated the importance of weighing climate risk in business, he also said oil and gas are essential to meet short-term energy needs. BlackRock is investing in natural gas pipelines in an effort to reduce methane emissions from those pipelines, Fink said.
Meanwhile, BlackRock is offering investors the option to invest in clean technologies, such as carbon capture storage pipelines and technologies that turn waste into natural gas, he said.
“I wrote last year that the next 1,000 unicorns won’t be search engine or social media companies. Many of them will be sustainable, scalable innovators — helping to decarbonize the world and make all Consumers can afford energy transition startups. I still believe in that,” Fink wrote. “For selected clients, we connect them with these investment opportunities.”