For more than a decade, Larry Fink, CEO and Chairman of BlackRock, has written an annual letter to the CEOs of companies BlackRock invests in for our clients. He began writing about themes he believes are important to generating durable returns because many investors are increasingly distracted by what are often immaterial market moves. He felt there needed to be a louder voice for the investors focused on the long term.
He has written about capital management, corporate strategy, purpose, sustainability, and stakeholder capitalism. These and other topics have changed over time, but the central thread through all of them is that companies need to be managed with a long-term view.
Over the years these letters have become an influential factor for CEOs considering how to create value, not just for their shareholders, but other key stakeholders including employees, clients, customers, and the communities in which they operate. They are also a driving force for BlackRock’s employees, who play a central role in defining how we operate as a business, how we serve our clients, and how we innovate ahead of clients’ needs.
Creating Impact
The impact of these letters can be felt across the business community. When Larry Fink’s letter on the importance of corporate purpose was published in 2018, some of America’s largest employers responded. The Business Roundtable, a leading group of American CEOs, redefined the purpose of a corporation to promote “an economy that serves all Americans”. The new statement reflected a shift away from shareholder primacy and a move towards stakeholder capitalism, and the need for corporations to serve all key stakeholders to deliver long-term value.
Driving Change
Sustainability is another area where taking a long-term view is crucial for corporate success. In 2020, BlackRock coined the phrase “climate risk is investment risk” and called for a greater focus on the effects of climate change on asset valuations. A long-term view led us to put a greater emphasis on climate-related disclosures and strengthen our commitment to sustainability in our investment and stewardship activities. BlackRock and other institutional investors have called for greater reporting from companies under frameworks like the Task Force on Climate-Related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) so we can better understand long-term sustainability-related risks.
It also led BlackRock to create new investment funds and other initiatives like Decarbonization Partners, which invests in the next generation of technologies that will bring us closer to a net zero economy. And it inspired our philanthropic donation to Breakthrough Energy’s Catalyst Program, which invests in accelerating the development and scaling of clean energy solutions that will mitigate the impact of climate change.
Taking a long-term view is at the foundation of BlackRock’s strategy. Whether it’s through engaging with CEOs and their management teams as stewards of our clients’ investments; the investment products and risk management tools we create; or empowering our employees; it defines how we deliver for all our stakeholders.