Climate change has become a decisive factor in companies’ long-term prospects. Larry Fink, BlackRock founder in his annual letter to chief executives said that companies which take sustainable investments into account will have better returns. The founder of the world’s largest fund manager hinted that there could be a significant reallocation of capital in the future.
BlackRock, though world’s most powerful investor, with around $6.84 trillion of assets under management, has come under criticism for not doing enough to address climate change.
In his letter Fink wrote, investors are more aware than ever and they have started to realize that climate risk is an investment risk. Fink said, BlackRock will announce a number of initiatives which would place sustainability at the centre of our investment approach, which includes pulling away from further investments in thermal coal producers. This letter comes in wake of continuous bush fire in Australia which has claimed about 28 lives and destroyed more than 2000 homes.
Recently concluded World Economic Forum at Davos also held a discussion on Climate change. Main area of concern has been on how to mobilize business to respond to the risks of climate change.
Fink wants the firm’s sustainable assets to grow from $90 billion to $1 trillion over 10 years. He wrote, our investment conviction is that sustainability- and climate- integrated portfolios can offer better risk-adjusted returns to investors.
He further adds, sustainable investment would be the strongest foundation for BlackRock going forward.