Larry Fink believes the sweeping structural changes he foresaw when BlackRock went green are now coming to pass.
Speaking to the Financial Services Council’s (FSC) inaugural Investment Summit, Mr Fink described the realisation that climate change posed an existential threat to the global financial system – a realisation that drove BlackRock’s sweeping fossil fuel divestments early this year – as “like somebody hit (him) with a bat”.
“There’s no question in my mind, the frequency of events is showing us real evidence that climate change is investment risk,” Mr Fink said.
“And I believe every company has to start thinking now about how climate risk is impacting their company and how they are preparing…No company should be surprised about how this is evolving and changing. All companies have to be prepared. And it’s very clear that we’re going to see a seismic reallocation of capital. In 2020 we are really seeing that.”
Mr Fink said that BlackRock had seen doubled inflows into climate associated strategies since the start of 2020, and that COVID-19 has only accelerated the global desire to combat climate change as more companies realise that they have the power to shape discourse and decisions.
“I think this path that we were on was an acceptance of our responsibility as a firm to have a voice, our acceptance as a firm to focus on the needs of our clients,” Mr Fink said.
“I’d say more that we were a follower than a leader. Quite frankly, last year – especially in the third and fourth quarter – as I was beginning to write my 2020 letter, every client meeting had some component around sustainability and what we think about it.”
Mr Fink believes that all long-term investment strategies – including super and pension funds – now need to have a climate risk overlay in order to protect their members, but that money managers should focus on being advocates for their clients rather than changing the world.
“Our role as the leading investment firm in the world is to have a voice, and by having our loud voice we have been enriched by our clients,” Mr Fink said.
“Clients want our voice and we have been rewarded with more share of wallet because of our voice.”