BlackRock head Larry Fink has warned CEOs that their companies will fall by the financial wayside if they don’t embrace purpose.
In his Jan. 14 letter to CEOs, Fink wrote that “serving stakeholders and embracing purpose is becoming increasingly central to the way that companies understand their role in society."
In short, “a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.”
A pharmaceutical firm may jack up prices or a bank may take advantage of its customers to maximize short-term gains, but those actions are going to catch up with them over the long-haul.
“By contrast a strong sense of purpose and a commitment to stakeholders helps a company connect more deeply to its customers and adjust to the changing demands of society,” wrote Fink. “Ultimately, purpose is the engine of long-term profitability.”
BlackRock, which is the world’s biggest asset manager with $7T in investments, is putting sustainability at the center of its investment approach.
It will drop investments that have a high sustainability-related risk, such as coal producers, launch new products that screen fossil fuels and strengthen its commitment to transparency in its investment stewardship activities.
Fink wrote that climate change presents a long-term crisis and companies have a responsibility and an economic imperative to give shareholders a clear picture of their preparedness.
Greater transparency will be an important component of the ability to attract capital and help investors determine which companies are effectively serving their stakeholders, according to Fink.
“Disclosure should be a means to achieving a more sustainable and inclusive capitalism,” he wrote. “Companies must be deliberate and committed to embracing purpose and serving all stakeholders—your shareholders, customers, employees and the communities where you operate. In doing so, your company will enjoy greater long-term prosperity, as will investors, workers and society as a whole.”
As Fink warns of the financial risk posed by climate change, three Senators want him to back up his fine words with action.
Democrats Sheldon Whitehouse (RI), Brian Schatz (HI) and Martin Heinrich (NM) want the four largest institutional investors (BlackRock, JPMorganChase, State Street and Vanguard) in Marathon Petroleum to demand that it drop its “relentless lobbying against climate action, particularly its efforts to unwind fuel efficiency standards for automobiles.”
In their Jan. 10 letter, the Senators asked the CEOs of Marathon’s top institutional investors to use their positions “to discuss with Marathon why fiercely lobbying against efforts to limit carbon pollution is not only bad for the environment but also bad for Marathon’s long-term business prospects.”
Noting that BlackRock and the other investors have stated a commitment to climate action and a concern about climate risk, the Senators wrote: “Marathon’s pattern of repeatedly opposing efforts to limit carbon pollution should be doubly concerning: first, because the transition to a low carbon economy is inevitable, and by deciding to forgo any diversification strategy: and second, because Marathon’s effort to undermine climate policy run directly counter to your stated commitment in favor of climate action.”
The institutions “have a critical role to play in shaping the lobbying and influencing activities of the companies they own to ensure that this considerable influence is not condoned against the climate action you claim to support,” according to the politicos.
What do you say, Larry?
Marathon spent $4M in federal lobbying during the latest 12 months. Ogilvy Government Relations scooped up $320K of that windfall.