“Because capital markets drive future risk, we will see changes in capital allocation faster than we see changes in the climate itself,” Fink wrote in the letter. “In the near future, and sooner than most expect, there will be a significant reallocation of capital.”
That change is already underway.
The European Union plans to dedicate a quarter of its budget to addressing climate change and has established a scheme to invest € 1 billion ($ 1.6 billion) in investments to make the region’s economy more environmentally friendly in the next 10 years.
In the near future, and ahead of schedule, there will be a significant reallocation of capital.
Blackrock CEO Larry Fink
The Investment Plan in Europe, which will be released on Tuesday, will be financed by the EU budget and the private sector. Its objective is to comply with the green agreement of the president of the European Commission, Ursula von der Leyen, to make the block the first carbon-neutral continent in the world by 2050.
The BlackRock change is substantial. The firm has long been a target of environmental activists who have organized protests outside their headquarters in Midtown Manhattan. It has been persecuted by some members of the United States Congress who believe that BlackRock could better address climate change with its great economic weight.
Due to its size and scope, any BlackRock change of focus has the potential for much broader ramifications. The company has operations in dozens of countries and is often called the largest shadow bank in the world.
“Over time, companies and countries that do not respond to stakeholders and address sustainability risks will encounter increasing market skepticism and, in turn, a higher cost of capital,” Fink wrote.
“Companies and countries that defend transparency and demonstrate their capacity to respond to interested parties, on the contrary, will attract investments more effectively, including higher quality and more patient capital.”