Larry Fink: climate change will "reshape finance"

Larry Fink, chief executive, BlackRock, believes that changes in the global climate will redefine the way modern markets work.

Climate change is about to trigger “a fundamental reshaping of finance”, says Larry Fink, the chief executive of BlackRock, the world’s largest asset manager. Greatly increased risk of floods or drought poses a threat to “core assumptions” about the way that the modern markets work. “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 the impacted areas?” 

But putting “sustainability at the centre of our investment approach” – as Fink says he now wants to do – may be harder than it sounds for a firm that holds two-thirds of its $7trn of assets in index-tracking funds, says Annie Massa on Bloomberg. BlackRock says that it will start ditching investments such as thermal coal producers from its active funds. However, with trackers, it’s the index compilers such as MSCI who decide what goes into the funds, so changing the holdings will be trickier.

BlackRock will launch further sustainable ETFs and push index providers to create sustainable versions of key indices to provide an alternative. But its most powerful weapon would be its “enormous voting muscle”, says Nils Pratley in The Guardian – that is, backing shareholder resolutions aimed at improving the behaviour of “foot-dragging management”. Here, Fink’s comments are vague, merely saying that the firm will be “increasingly disposed” to do so. That “does not sound like a battle cry”.

Recommended

The end of cheap money hits the markets
Stockmarkets

The end of cheap money hits the markets

Markets have swooned as central banks raise interest rates, leaving the era of cheap money behind.
28 Sep 2022
There is light at the end of the tunnel for investors
Sponsored

There is light at the end of the tunnel for investors

Investors are gloomy. But it’s not all bad, says Max King – the mood could be about to shift. You just need to hold your nerve for a little while long…
27 Sep 2022
The hidden cost of employee share schemes
Investment strategy

The hidden cost of employee share schemes

Paying employees in shares comes at a cost to investors – but it isn’t always easy to see how much, says Stephen Clapham.
26 Sep 2022
The MoneyWeek Podcast: you may not make any money this year – so just try not to lose any
Investment strategy

The MoneyWeek Podcast: you may not make any money this year – so just try not to lose any

In her final MoneyWeek Podcast, Merryn talks to James Ferguson, founder of the MacroStrategy Partnership, about why high inflation and rising interest…
22 Sep 2022

Most Popular

What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022
Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?
Budget

Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?

The government has launched the biggest dash for growth in 50 years, relaunching an approach known as supply-side economics. What is the plan – and wi…
30 Sep 2022