Larry Fink is sending his annual letter to CEOs this morning. It’s a little later than usual and I’ve been feeling like I was waiting for Moses to come down from the mountain. Based on the signals that BlackRock sent with the Stewardship Expectations it released in December (which, as I blogged on our Proxy Season Blog, said the asset manager would put more companies “on watch” for climate risks), it’s not too surprising that the letter urges companies to disclose their “net zero” business plan and to explain how their board oversees that strategy. But if anyone had any doubts that BlackRock wants that information, this letter should lay those to rest. Here are the high points:
– We are asking companies to disclose a plan for how their business model will be compatible with a net zero economy – that is, one where global warming is limited to well below 2ºC, consistent with a global aspiration of net zero greenhouse gas emissions by 2050.
– We are asking you to disclose how this plan is incorporated into your long-term strategy and reviewed by your board of directors.
– We strongly support moving to a single global standard, which will enable investors to make more informed decisions about how to achieve durable long-term returns.
– Because better sustainability disclosures are in companies’ as well as investors’ own interests, I urge companies to move quickly to issue them rather than waiting for regulators to impose them. (While the world moves towards a single standard, BlackRock continues to endorse TCFD- and SASB-aligned reporting.)
– In addition, TCFD should be embraced by large private companies and public debt issuers
– As you issue sustainability reports, we ask that your disclosures on talent strategy fully reflect your long-term plans to improve diversity, equity, and inclusion, as appropriate by region.
The letter says the lines are blurring between “E” & “S” issues – for example, climate change has a disproportionate impact on low-income communities. So improved data and disclosure are all the more important to understand the interdependence between these topics.
Mr. Fink is also bullish on sustainability investments. In his letter to clients that was also released today, he explained that they’ll be publishing a temperature alignment metric for their funds, implementing a “heightened-scrutiny model” in active portfolios (including potential divestments), launching more sustainability investment products, and “using stewardship to ensure that the companies our clients are invested in are both mitigating climate risk and considering the opportunities presented by the net zero transition.”