Larry Fink, chief executive officer of BlackRock, focussed on embracing stakeholder capitalism as a catalyst for change in his 2022 letter to CEOs, published today.
He said stakeholder capitalism was not about politics or a social or ideological agenda.
“It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper,” Fink added [own emphasis]. “This is the power of capitalism.”
He called on CEOs to have “a consistent voice, a clear purpose, a coherent strategy, and a long-term view”, positioning this as necessary in the context of new challenges for CEOs stemming from exacerbated polarisation in many Western societies.
“Political activists, or the media, may politicise things your company does,” Fink told CEOs. “They may hijack your brand to advance their own agendas. In this environment, facts themselves are frequently in dispute, but businesses have an opportunity to lead.”
He added: “Employees are increasingly looking to their employer as the most trusted, competent, and ethical source of information – more so than government, the media, and NGOs.”
Although Fink backed stakeholder capitalism, he also said BlackRock believed there was “still much to learn about how a company’s relationship with stakeholders impacts long-term value”.
The asset manager, which exceeded $10bn (€8.8bn) in assets under management at the end of 2021, was therefore now launching a Center for Stakeholder Capitalism, bringing together leading CEOs, investors, policy experts, and academics in a “forum for research, dialogue, and debate”.
“It will help us to further explore the relationships between companies and their stakeholders and between stakeholder engagement and shareholder value,” Fink said.
Key themes of Fink’s letter included the change in the relationship between employers and employees as a result of the coronavirus pandemic, with Fink stating that BlackRock wanted to know how companies were adjusting to this new reality.
Proxy voting choice for corporates, too
Fink also brought up previously announced steps to give more of BlackRock’s clients – certain institutional clients, namely – the option to have a say in how proxy votes are cast. He said many corporate leaders were responsible for overseeing equity assets and encouraged them “to ask that your asset manager gives you the opportunity to participate in the proxy voting process more directly”.
Fink also wrote about how sources of capital were fuelling market disruption and about “capitalism and sustainability”, asking CEOs whether they would lead or be led in the transition to a net-zero world.
Echoing comments made on other occasions, Fink said capitalism had the power to shape society and act as a powerful catalyst for change, but that the private sector needed help from government for this impact to be achieved.
NGOs criticised Fink’s letter for the comments Fink made about natural gas – playing a role to ensure continuity of affordable energy supplies during the transition – and divestment – “will not get the world to net zero” – and a lack of new announcements pertaining to BlackRock’s fossil fuel holdings.
“Larry Fink wants climate action, but not too much,” said Lara Cuvelier, campaigner at Reclaim Finance.
In the previous two years, Fink’s Dear CEO letter was paired with a letter to clients. Last year, for example, in the letter to clients BlackRock set out a commitment to supporting the goal of net-zero greenhouse gas emissions by 2050.
The asset manager did not at the time announce a net-zero goal for its own portfolio, although it has since done so as part of joining the Net Zero Asset Managers Initiative (NZAMI). It has until the end of March this year to submit an interim target for the proportion of assets to be managed in line with net-zero emissions by 2050 or sooner.
The NZAMI signatories that have so far submitted these targets have on average committed to managing 35% of their assets in line with net-zero emissions.