BlackRock CEO’s letter on climate change signals where finance is headed

January 15, 2020, 11:45 AM UTC

Good morning.

BlackRock CEO Larry Fink is making a strong statement on climate change at the start of the new decade. In his letter to CEOs yesterday, the man who runs the world’s largest asset manager said: “We are on the edge of a fundamental reshaping of finance. The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”

So what is BlackRock doing about it? Fink said the company will make “sustainability integral to portfolio construction and risk management,” exit “investments that present a high sustainability-related risk, such as thermal coal producers,” launch “new investment products that screen fossil fuels,” and strengthen “our commitment to sustainability and transparency in our investment stewardship activities.”

That’s a big deal. But it’s not as big as it appears at first blush. That’s because much of what BlackRock sells are index funds, which by definition, include all the stocks in the index. It can’t just remove an S&P 500 company from the S&P 500 index because it decides it’s not “sustainable.” Indeed, by virtue of its size and its passive method of investing, BlackRock will remain one of the world’s largest investors in fossil fuel companies.

Still, Fink’s letter is an important sign of where the world of finance is headed. An increasing group of investors wants to know their money is going to companies that contribute to solving the climate problem. And it sounds like BlackRock will create new products that enable them to do just that. Precisely what that means, how far it goes, how it gets done, how “sustainability” gets measured, etc., all remain to be seen. But the direction is clear.

On a separate note, today is a very big day at Fortune. This morning, we launched a redesigned website, and an immersive video hub featuring our exclusive executive interviews. Our next magazine issue will also feature a completely upgraded design that hails back to our founding 90 years ago, with an original art cover. New apps for iOS and Android are coming, too. We have also expanded our journalism, and we are putting up a registration wall that eventually will become a paywall. We believe that in business, it pays to know, and we will be asking our readers to contribute to the cost of our best journalism.

As we go down this path, we are committed to giving you, our readers, what you want and need. So more than ever, we want to hear from you. Send me your thoughts.

More news below. And you can watch the Fortune team ring the bell at the close of yesterday’s New York Stock Exchange trading session here.

Alan Murray


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This edition of CEO Daily was edited by Katherine Dunn. 

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