Larry Fink, BlackRock Chairman, Emphasizes the Need for ESG Investment and Climate Change Response
[Asia Economy New York=Correspondent Baek Jong-min] The world's largest asset management firm, BlackRock, has publicly demanded that investment companies worldwide disclose their Net Zero carbon neutrality plans.
BlackRock manages assets worth $7.8 trillion (approximately 8,500 trillion KRW) and invests in Korean companies such as Samsung Electronics and Hyundai Motor Company, making this a matter that cannot be ignored by Korean firms.
With many BlackRock alumni positioned in the economic team of the Joe Biden administration, pressure on companies to respond to climate change is expected to intensify.
On the 26th (local time), Larry Fink, Chairman of BlackRock, sent an annual letter to CEOs worldwide, demanding that each company disclose plans showing how their business structure aligns with Net Zero. He argued that information on energy transition is necessary for growth prospects.
Net Zero refers to a state where the total greenhouse gas emissions (+) and removals (-) sum to zero net emissions.
He also requested companies to disclose how they integrate Net Zero into their long-term business strategies and how their boards review these matters.
In last year’s letter, Fink declared that environmental sustainability would be a core objective and stated that BlackRock would not invest in companies ignoring climate change risks, demonstrating a strong commitment to ESG investing. ESG refers to investments considering Environment, Social, and Governance factors.
Regarding this, The New York Times (NYT) described Fink’s demands as significant pressure on companies. The NYT reported that Fink could remove executives of companies refusing his requests and exclude them from BlackRock’s investment targets. According to the NYT, last year BlackRock opposed 69 companies and 64 executives at shareholder meetings and placed 191 companies under surveillance.
The NYT also noted that while BlackRock cannot immediately exclude companies indifferent to climate change from passive funds linked to the S&P 500 index, it is expanding index-linked funds based on sustainability to exclude investments.
Fink also mentioned in this letter plans to adjust investment guidelines for actively managed funds, which allow free entry and exit.
Fink emphasized that BlackRock will also explain its response to climate change to investors. He declared the launch of new products that disclose climate-related metrics for funds managed by BlackRock and present global temperature targets.
After emphasizing climate change response in last year’s letter, Fink noted that despite the outbreak of COVID-19, investments preparing for climate change increased sharply.
He described the 96% increase in inflows to mutual funds and exchange-traded funds (ETFs) addressing climate change from January to November last year, reaching $28.8 billion, as the beginning of a transition. He argued, "Climate change is both an investment risk and a historic investment opportunity."
Fink’s demands were presented a day before U.S. President Joe Biden announced an executive order related to climate change. President Biden is scheduled to sign an executive order on the 27th banning new oil drilling on federally owned lands.
Additionally, on the same day, John Kerry, U.S. Special Presidential Envoy for Climate, will announce the U.S. stance on climate change at the World Economic Forum (WEF) virtual meeting.
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