Letter from an 800-pound Gorilla: BlackRock’s Climate Change Agenda
Recently, BlackRock Chairman and CEO Larry Fink authored his annual letter to CEOs. The letter indicated that corporate action on climate will be central to BlackRock’s investment considerations, not just for environmental reasons – but because it believes that climate change will reshape the world's economy.
Fink’s letter speaks to the fundamental shifts in business finance and corporate strategy that are needed as a response to a changing climate. The letter is also a reminder that the economic impacts of climate change are not going to be felt by our children and grandchildren – they are going to be felt by us and our communities, and sooner than we’d like to imagine:
"Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?
These questions are driving a profound reassessment of risk and asset values. And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future – and sooner than most anticipate – there will be a significant reallocation of capital."
BlackRock, the world’s largest asset manager, may be the 800-pound gorilla 7 trillion-dollar gorilla in the room, but it’s up to stakeholders to consider the shifting environmental and economic context of their communities. Companies like Delta and Microsoft have made bold claims about how they will fight climate change by going carbon neutral or even carbon negative. How will smaller companies and communities respond?
We’ve written before about the economic costs associated with climate events and considerations to include when planning for a more resilient economy. In addition to the business community, actors across the economic development system including community and nonprofit leaders, state and local elected officials, and chambers of commerce bear responsibility in helping to shape a more resilient economy. Leaders should seek to model and plan for the social and economic impacts of climate change as part of their economic development planning efforts.