‘The greatest opportunity of our lifetime’, according to world’s biggest investor

·3-min read
Computer generated image of stock chart, world map, Larry Fink speaks while wearing microphone.
BlackRock CEO Larry Fink has laid out his priorities. (Sources: Getty)

The decarbonising of the global economy will foster the “greatest investment opportunity” of a lifetime, the world’s largest asset manager has said, calling on CEOs to take note.

Companies, cities and countries that fail to plan for and take advantage of the sustainability revolution risk being left behind, BlackRock CEO Larry Fink said in his annual letter to CEOs this week.

Since 2012, Fink has used his annual letter to CEOs to highlight the challenges and opportunities BlackRock sees on its road to delivering long-term returns.

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BlackRock recently became the first fund manager to surpass more than US$10 trillion in funds under management, ending 2021 with US$10.01 trillion (AU$13.93 trillion) on its books.

Now, it’s setting its eye on the transition to net zero.

“The decarbonisation of the economy will be accompanied by enormous job creation for those that engage in the necessary long-term planning,” Fink said in his latest missive.

“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 decarbonise and make the energy transition affordable for all consumers.”

However, he noted that building this greener future would come at a higher immediate cost and it was essential that businesses and policy makers worked together to lower the cost of the transition.

Keeping an eye on the environment was now essential risk management, Fink added, echoing similar statements he made in his 2021 letter.

And focusing on sustainability was a capitalist goal, he said, and one that required understanding how the companies it invested in were working towards a clean future.

“As part of that focus, we are asking companies to set short-, medium-, and long-term targets for greenhouse gas reductions," Fink said.

"These targets, and the quality of plans to meet them, are critical to the long-term economic interests of your shareholders.”

However, he doesn’t believe divesting from entire sectors like mining will deliver the long-term results needed to arrive at net zero.

“Governments and companies must ensure that people continue to have access to reliable and affordable energy sources,” Fink said.

“Any plan that focuses solely on limiting supply and fails to address demand for hydrocarbons will drive up energy prices for those who can least afford it, resulting in greater polarisation around climate change, and eroding progress.”

COVID-19 vaccines proof of how business and government can work together

The development and deployment of several COVID-19 vaccines highlighted how businesses and government could work together, Fink said, calling on both groups to use similar energy to target net zero.

However, he rejected suggestions BlackRock was attempting to be politically correct by pushing towards net zero.

“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke',” he said.

“It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper.

"This is the power of capitalism.”

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