25 Jan 22

Larry Fink of BlackRock’s 2022 letter to CEOs – key takeaways

LF 2022 letterEach year, Larry Fink, the CEO of BlackRock, one of the largest asset management companies worldwide, releases a letter to CEOs. In this blog, we summarise some key points of Larry Fink’s 2022 letter to CEOs.

 

Race to net-zero: Lead or be led

Most stakeholders now expect companies to be key players in preparing for and participating in the net-zero transition. There are only a handful of things that can have an impact on companies more than how they contribute to the decarbonisation of the global economy in the coming years.

In his letter, Larry Fink points out that sustainable investments have now reached US$4 trillion and efforts and initiatives towards decarbonisation are on the increase, and this is just the beginning. We are starting to see changes in every industry. Larry Fink adds that the question that most companies need to ask is: are they going to be leaders during this transformational period?

 

Setting targets will be profitable for all stakeholders

Focusing on sustainability, ESG, and adopting environmentally friendly practices, is something that most companies are already doing or are starting to do. What Larry Fink states in his letter is that whether this is part of the core value of your company or not, setting short-, medium-, and long-term targets for greenhouse gas emissions reductions or issuing reports consistent with the Task Force on Climate-related Financial Disclosures (TCFD), is and will be profitable for all stakeholders.

'The transition to net-zero is already uneven with different parts of the global economy moving at different speeds. It will not happen overnight.'

 

Companies must provide purpose-driven value

As a part of a global community, companies are expected to produce value as well as be valued. CEOs need to have a uniform voice, a precise objective, a coherent plan, and a long-term view.

Companies today rely on the opinion of stakeholders more than ever. At the same time, stakeholders need to feel inspired by companies. They need to understand where a company stands on societal and environmental issues.

 

Sustainability focused companies will thrive

There is an exceptional amount of capital available for investing in new, sustainable ideas. Larry Fink predicts that companies that have an innovative plan to succeed in a net-zero economy, will be in the spotlight.

‘The next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers.’

 

Blackrock: Empowering clients with choice on ESG votes

As the world is shifting to net zero, the CEO of Blackrock states that they see a growing interest among shareholders to be at the forefront of that transition. This is why they are empowering their clients with choice on ESG votes. Blackrock is leading the way for other companies to display how they are planning to deliver on their commitment to shareholders, through strong ESG approaches and procedures.

 

The pandemic has changed the relationship between companies and stakeholders

Almost every company's working environment has changed as a result of the pandemic. In his letter, Larry Fink notes that this change is hastening the transformation of life and business as a result of technology. Innovative businesses seeking to adapt to this climate now have more funding options than ever before. Furthermore, the connection between a corporation, its employees, and society is evolving. For CEOs, this division creates a slew of new problems. A company's activities may be politicised, but companies still have a chance to lead.

‘Companies that deliver are reaping the rewards. Our research shows that companies who forged strong bonds with their employees have seen lower levels of turnover and higher returns through the pandemic.’

 

If you would like to explore how Greenstone can help with your sustainability and ESG data collection and reporting strategy in relation to TCFD, SASB and your wider ESG and sustainability reporting strategy, please talk to us.

 

Environment , ESG