By now, about everyone in the investment and ESG world knows that BlackRock CEO Larry Fink’s annual letter to corporate CEOs went out last week – this year’s edition titled “The Power of Capitalism”. There have been – and will continue to be – plenty of analyses and parsing of his words similar to what happens when Berkshire Hathaway CEO Warren Buffett issues his annual letters (an event unto its own). I have mulled over Mr. Fink’s missive for a few days thinking about the best way to convey what it says. During that time Liz Dunshee wrote about it here on TheCorporateCounsel.net.
Rather than trying too hard to interpret Mr. Fink’s words as I would have done, Liz extracted key practical ESG themes for the world’s largest investment fund manager for 2022. These are:
- stakeholder capitalism is simply capitalism. I have said for years that a company must be profitable to be sustainable, otherwise all its ESG achievements will fade away with the business and other leaders will see that as a failure and choose not to invest in ESG efforts. BlackRock also believes that stakeholder capitalism is essential for long term survival and success.
- how are companies forging strong bonds with their employees, maintaining a positive and equitable working environment – rather than just assuming compensation is the only lever for employee happiness and retention?
- companies need to demonstrate plans for transitioning to a low carbon economy. General climate statements and commitments won’t cut the mustard anymore. BlackRock wants to see short-, medium-, and long-term targets for greenhouse gas reductions and will apparently be reviewing the quality of plans to meet the targets. Mr. Fink has previously made clear his position that he advocates supporting transition and engaging with portfolio companies rather than divesting holdings.
- they will soon be turning over some voting power to their clients and individual investors. You can read Liz’s earlier analysis of that announcement.
- the launch of a “Center for Stakeholder Capitalism” – which will “bring together leading CEOs, investors, policy experts, and academics to share their experience and deliver their insights.” The hope is that this will explore “relationships between companies and their stakeholders and between stakeholder engagement and shareholder value.”