BlackRock Inc. is making sustainability its standard for investing, given the risk that global climate change poses to "economic growth and prosperity," Chairman and CEO Laurence D. Fink said Tuesday in his annual letter to corporate CEOs.
"The evidence on climate risk is compelling investors to reassess core assumptions about modern finance," Mr. Fink said, adding that he expects "in the near future — and sooner than most anticipate — there will be a significant reallocation of capital."
Climate change is "almost inevitably the top issue that clients around the world raise with BlackRock," Mr. Fink said.
He said BlackRock clients worldwide have expressed strong interest in reallocating assets to sustainable investment strategies in conversations with the New York-based firm, the world's largest money manager.
"If 10% of global investors do so — or even 5% — we will see massive capital shifts. And this dynamic will accelerate as the next generation takes the helm of government and business," Mr. Fink said in his letter.
In terms of governance, Mr. Fink warned corporate CEOs: "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."
BlackRock is preparing for investor reallocation with a series of changes across the firm's investment and technology platforms, according to a letter to BlackRock clients by the firm's global executive committee issued Tuesday.
"Where we have the greatest discretion — in portfolio construction, our active and alternatives platforms and our approach to risk management — we will employ sustainability across our investment process," the client letter said.
Among the sustainability enhancements BlackRock plans for its $6.96 trillion of assets under management:
- Sustainability will become an integral part of portfolio construction and risk management for actively managed portfolios and solutions-based funds.
- BlackRock will divest from publicly traded companies that derive more than 25% of their revenues from thermal coal production by the middle of the year.
- The number of ESG ETFs will double to 150 over the next few years, including sustainable versions of some of the firm's flagship index funds.
- BlackRock also will expand its range of sustainable actively managed strategies, including those focused on the global energy transition and impact investing funds.