“Climate change is almost invariably the top issue that clients around the world raise with BlackRock,” Larry Fink wrote. The head of the world’s largest money manager put that line in his annual letter to fellow chief executives, published on a Tuesday ahead of the World Economic Forum.
His message was plain. The climate crisis, he said, will bring “a fundamental reshaping of finance,” and a significant reallocation of capital is coming “sooner than most anticipate.” BlackRock’s assets under management came to almost $7 trillion in the third quarter of 2019.
“Climate change has become a defining factor in companies’ long-term prospects,” Fink wrote. “But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Clients asking about their portfolios
Fink said the questions come from everywhere. “From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios,” he wrote.
His reasoning is that markets move early. “Because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself,” he wrote.
Not like earlier crises
Fink has worked in finance for 40 years. In that time he has seen the inflation spikes of the 1970s and early 1980s, the Asian currency crisis in 1997, the dot-com bubble and the global financial crisis. Each of those, he said, was short-term in the broad scheme of things, even when it dragged on for years.
“Climate change is different,” he wrote. “Even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis.”
The United Nations has called climate change “the defining issue of our time,” and a recent report described it as “the greatest challenge to sustainable development.”
Australia’s fires
The warning landed while Australia was in the news for one of its worst bush fire seasons on record. Record heat and drought, made worse by the climate crisis, have fueled blazes that have killed more than two dozen people and destroyed 2,000 homes since September.
Business leaders, policymakers and investors were preparing to travel to Davos, Switzerland, the following week. The forum’s theme this year is “Stakeholders for a Cohesive and Sustainable World.”
