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Investors send a clear signal to business leaders on climate change

By Cian Duggan
24th January 2020

Some events will be bookmarked and looked back on as turning points in moving the world forward. Larry Fink’s January 2020 letter to the CEOs of companies that BlackRock invest in will be one of these events.

 

2019 saw a significant shift in the narrative and mood music around the connections between business and climate change along with stronger emphasis on ESG. This shift was felt by sustainability teams who are increasingly feeding into conversations at board level and the information they provide being used to inform key decisions. This is a sharp contrast to the historically difficult push to have sustainability on the boardroom agenda.

 

In recent months, I’ve had a significant number of clients tell me that suddenly they are being asked by their c-suite, their marketing department, their sales department, their HR department for information and advice relating to sustainability. Sustainability is no longer just the concern of one team, the risks and opportunities of either doing Environmental Social Governance badly or well are beginning to be understood throughout their whole organisations. Moreover the strategic component of sustainability is being used to enhance brand value, reputation, talent attraction and retention, and increase competitiveness. 

 

Larry Fink’s letter is all about climate change, sustainability as the new standard for investing, transparent disclosures, increasing engagement and voting against management who are not progressing on sustainable disclosures and business practices. Bold, ambitious action.  

There is also a good summary here from the New York Times.

 

I draw your attention to these quotes from the letter:

“Climate change has become a defining factor in comapanies’ long-term prospects.”

“We believe that sustainable investing is the strongest foundation for client portfolios going forwards.”

 

Blackrock, like many other financial organisations, will this year begin asking companies it invests in to:
“(1) publish a disclosure in line with SASB guidelines
(2) disclose climate-related risks in line with the TCFD’s”

And why? Because, as Fink says “In the absence of robust disclosures, investors, including BlackRock, will increasingly conclude that companies are not adequately managing risk.” And “climate risk is investment risk.”

 

These are clear signals from the investment community that for all companies a better understanding of climate related risks and opportunities will be required, better data will be required to meet this demand. And then with the understanding of those risks and opportunities, all sensible organisations will then need a good programme to incorporate carbon intelligence throughout their operations so they can adapt and take appropriate action towards a zero carbon future.

Or as Mark Carney (Governor of the Bank of England until this month) said recently “A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?”

Do you have a robust, defensible, flexible, exciting ESG plan? If not, definitely contact us, and let us help you to build that roadmap. And with an agreed plan in place, we can then help create the programme to achieve the plan. Over the last 10 years we’ve done it for many other businesses, we can do it for yours, info@carbon.ci