In his annual missive to chief executives, BlackRock CEO Larry Fink has called for an embrace of ‘stakeholder capitalism’, urging companies to act on sustainability issues as an integral part of creating long-term value for shareholders.
In response to criticism from US conservatives, Fink has rejected claims that his firm’s recent focus on sustainability belies an ideological, ‘woke’ agenda. Instead, he echoes the work of organisations such as the World Economic Forum and UK-based Better Business Act, insisting that in our increasingly connected world, companies must create value for their full range of stakeholders in order to provide long-term returns for shareholders.
“It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long term. Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success.” – Larry Fink, BlackRock CEO.
Referencing the challenges raised by the eroding trust of institutions, climate change, and the COVID-19 pandemic, Fink emphasises the importance of corporate purpose as a company’s ’north star’. Fink reinforces his advice to put purpose at the heart of relationships with stakeholders and argues that it will be increasingly necessary if companies are to understand the changing world around them and continue to deliver sustainable profits.
Beyond advice, Fink speculates on the future of investment, innovation, and the ‘new world of work’ in the wake of the pandemic. He predicts the growth in sustainable investments will continue as the transition to a net zero economy accelerates and ponders the market disruption that may be driven by smaller, more nimble firms as global access to capital increases.
Touching on financial reporting, Fink reaffirms his support for the Task Force on Climate-related Financial Disclosures (TCFD) framework. Citing it as an essential tool for understanding a company’s future viability, the CEO encourages companies to report in line with the Task Force’s recommendations. With both the UK and US governments working towards introducing mandatory TCFD disclosures across the economy, Fink’s recommendation will likely be implemented imminently.
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