Sustainability

What Larry Fink’s 2021 Letter Means for Corporate Climate Action

Concept of transparency and climate action. Hand holding a square piece of glass, through which you can see a crystal clear landscape.

Last year, Larry Fink’s proclamation of BlackRock’s commitment to sustainable investing and catalyzed a surge of corporate and investor climate action. In 2020, 90% of companies in the S&P 500 index reported on their sustainability progress, whereas only around 20% did in 2011. Meanwhile, during a year of unprecedented disruption, 81% of sustainable indices outperformed their parent benchmarks.

Fink released his 2021 annual CEO letter last week, with powerful points for all companies to consider:

  • The pandemic has accelerated the tectonic shift that was already underway toward sustainable investments and climate risk disclosure
  • The net zero transition presents a historic investment opportunity for all companies, but those that do not adapt their business models will suffer
  • A single global standard for sustainability disclosure and data is needed to ensure investors are making decisions based on long-term, climate-compatible strategies
  • Companies that embrace sustainability and build deeper connections to stakeholders—from customers to employees to communities—drive better returns

As we saw in 2020, Blackrock’s decision to come out strongly on sustainability and climate action has a material impact on the way corporations will act. As the largest asset manager in the world, with $8.67 trillion in assets as of January 2021, the firm’s demand for sustainable investments sends a loud and clear message to companies that the transition to a low-carbon and more just economy is non-negotiable.

The proliferation of COVID-19 and the ensuing global shutdown throughout 2020 heightened awareness of the world’s vulnerability to potentially life-altering disruptions. The global impacts of climate change are anticipated to be far worse than COVID-19.  Fink perfectly captures the connection between these two seemingly unrelated disruptions in his letter:

“The pandemic has presented such an existential crisis—such a stark reminder of our fragility—that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives.”

Reducing emissions and embedding sustainable and circular processes into our businesses is not a reputational maneuver, as it may have been seen in the past. Fink makes clear that companies that turn a blind eye to this transition will lose investors’ faith, become misaligned with consumer values, and inevitably be left behind.

But there’s more to sustainable action than just keeping pace. It’s a chance, for the first time in human history, to build a truly resilient economy where both natural and human resources are managed responsibly. Change of this magnitude can be challenging, and growing pains are real. But the net outcome is positive for companies that truly commit to investing in their own sustainability and resilience, by transforming their business models into ones that work with the environment and society instead of against them.

There are signs of hope for a better and brighter tomorrow and your company holds the keys to a resilient future, today.

How will you unlock the door?

 

Click here to read BlackRock’s full CEO letter.

Click here to explore the 4-step pathway to decarbonization in Schneider Electric’s first of its kind suite of Climate Change Advisory services.

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