The annual release of Larry Fink’s Letter to CEOs is a major moment in the financial calendar. As the chairman and CEO of BlackRock, the largest asset manager in the world, Fink is one of the most important and influential people in finance, so his views command attention. And that’s why his recent statements on sustainability, ESG and more are generating so much discussion, even beyond the world of finance.
Fink’s 2022 Letter to CEOs
Over the past several years, Larry Fink’s Annual Letter to CEOs has increasingly stressed his belief in the importance of climate action for corporate success. For instance, two years ago, in his 2020 letter, Fink noted that “climate change has become a defining factor in companies’ long-term prospects,” and that the market had not yet fully reflected this fact. His statements were only part of a broader trend that we noted at the time – investors increasingly preferred companies that were involved in ESG.
In this year’s letter, Fink touched on a wide range of subjects, including a major emphasis on the changing relationship between employers and employees. “Workers demanding more from their employers is an essential feature of effective capitalism,” Fink noted, later adding that “companies not adjusting to this new reality and responding to their workers do so at their own peril.”
Why Sustainability Is Crucial for Corporations and Investors
When it comes to sustainability and sustainable energy strategy, Fink noted that it’s not just employees who demand it of organizations. In fact, Fink noted, “most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonizing the global economy.”
It’s a recurring theme, not just for Fink but for everyone from activists to sustainable investors: climate risk is significant, and thus a company’s long-term value is dictated in part by how it adapts to the coming energy transition. For companies to do this properly, they’ll need help from renewable energy consultants and experts.
“Every company and every industry will be transformed by the transition to a net zero world,” Fink writes. “The question is, will you lead, or will you be led?”
How Corporations Are Taking Action
These ideas are being supported by action: capital is shifting into sustainability. Just a year ago, Bloomberg said of the growth in sustainability investing that “the numbers are simply astounding,” noting that “governments, corporations and other groups raised a record $490 billion last year selling green, social and sustainability bonds. A further $347 billion poured into ESG-focused investment funds.” Fink himself writes in his 2022 letter that sustainable investments have now reached $4 trillion.
Corporations are altering their strategy accordingly, especially their energy decisions. For instance, PPAs are seeing record growth that is expected to continue this year, as we noted in our corporate analysis in our recent 2022 Energy Market Outlook. And the tools available to corporations for reducing emissions are proliferating.
The Change Is Accelerating
Fink notes that these are only first steps, and further changes are on the way. And these changes will come not only from new startups – he notes that “bold incumbents can and must do it too,” a category in which Enel X counts itself as it works to help businesses make better renewable energy decisions. Find out how Enel X can help your company prepare for the future.