BlackRock CEO Fink Sees Climate Change Becoming an Investment Risk

Summary

The speaker highlights the growing importance of climate change considerations in investment strategies, noting that clients increasingly seek guidance on integrating these risks into their portfolios. Drawing on conversations with CEOs, mayors, and industry leaders worldwide, the speaker emphasizes that climate change is now recognized as a tangible investment risk. They stress the need for improved risk assessment tools and transparent corporate reporting, referencing frameworks like SASB and TCFD. The discussion also notes that sustainable funds outperformed traditional funds in 2019 and that BlackRock is expanding sustainable options across all its products to better engage investors and navigate the evolving market landscape.

Takeaways

• 🌍 Clients worldwide are increasingly asking about integrating climate change considerations into their investment portfolios.
• 📈 Climate change is becoming a dominant theme for investors and requires focused attention from financial institutions like BlackRock.
• 🤝 Engaging with CEOs of insurance companies, housing companies, and city officials helped understand global climate-related investment concerns.
• 🔬 There is growing belief in climate science, even if not universally accepted, which impacts investment decision-making.
• ⚠️ Climate change is now recognized as an investment risk, similar to other financial risks such as yield curve changes.
• 🛠️ There is a need to develop better risk assessment tools to navigate climate-related risks effectively.
• 📊 Encouraging companies to self-report through frameworks like SASB and TCFD provides greater clarity on how they manage climate issues.
• 💡 Current ESG tools are useful but evolving; the industry is on a long path toward more precise measurement and reporting.
• 💰 In 2019, sustainable funds outperformed regular funds, highlighting the growing importance and potential of ESG-focused investing.
• 🚀 BlackRock announced that every product will have a sustainable counterpart to increase investor participation and dialogue around sustainability.

Q & A

Why did the speaker feel the need to focus on climate change in investment portfolios?

The speaker noticed increasing demand from clients worldwide asking how to frame portfolios with climate change considerations, realizing it was becoming a dominant theme and an important investment risk.

What actions did the speaker take to address climate-related investment concerns?

The speaker spent significant time from September through the end of the year talking to insurance company CEOs, housing company leaders, mayors, and other stakeholders worldwide to understand the impact of climate change and its investment implications.

How does the speaker view the relationship between climate science and investment risk?

The speaker acknowledges that more people are believing in some form of climate science, and thus climate change should no longer be avoided in investment conversations, as it represents a real investment risk similar to traditional financial risks like yield curve movements.

What is the role of risk management in addressing climate change according to the speaker?

The speaker emphasizes that capital markets typically bring risks forward and mitigate them in advance. Similarly, addressing climate change involves using better risk tools to navigate and manage climate-related investment risks.

What tools or frameworks does the speaker mention for evaluating climate risks in companies?

The speaker mentions frameworks like SASB (Sustainability Accounting Standards Board) and TCFD (Task Force on Climate-related Financial Disclosures) to improve clarity on how companies are addressing climate-related issues.

Does the speaker consider current tools for assessing climate risk to be perfect?

No, the speaker acknowledges that current tools are not perfect but considers them good starting points and believes the industry will continue to improve these tools over time.

How did sustainable funds perform in 2019 compared to regular funds?

According to the speaker, most sustainable funds outperformed regular funds in 2019, although this could be partially attributed to strong market momentum and significant inflows.

What strategy did the speaker's company implement regarding sustainable investment products?

The company announced that every product would have a sustainable counterpart, allowing more investors to participate in climate-conscious investment opportunities.

Why is climate change considered similar to other financial risks?

Climate change is treated like other investment risks because it has measurable impacts on investments, similar to risks related to the yield curve, market volatility, or other financial uncertainties.

How does client demand influence investment strategy in the speaker's view?

Increasing client interest in climate-related investing drives the speaker to integrate these considerations into the company’s focus, product offerings, and risk management strategies.

What is the speaker's long-term perspective on integrating climate risk into investments?

The speaker believes that addressing climate risk is a long-term journey, involving continuous improvement in risk tools, reporting standards, and investment practices.

What does the speaker mean by 'bringing forward better risk tools'?

The speaker refers to developing and applying more sophisticated methods and data-driven tools to assess, quantify, and manage climate-related investment risks before they fully materialize.