But we also believe the climate transition presents a historic investment opportunity.Įssential to this transition has been the growing availability and affordability of sustainable investment options. We know that climate risk is investment risk. 1 I believe that this is the beginning of a long but rapidly accelerating transition – one that will unfold over many years and reshape asset prices of every type. But just the opposite took place, and the reallocation of capital accelerated even faster than I anticipated.įrom January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase over the whole of 2019. Then the pandemic took hold – and in March, the conventional wisdom was the crisis would divert attention from climate. I said then that as markets started to price climate risk into the value of securities, it would spark a fundamental reallocation of capital. In January of last year, I wrote that climate risk is investment risk. No issue ranks higher than climate change on our clients’ lists of priorities. They are also increasingly focused on the significant economic opportunity that the transition will create, as well as how to execute it in a just and fair manner. They have begun to see the direct financial impact as energy companies take billions in climate-related write-downs on stranded assets and regulators focus on climate risk in the global financial system. In the past year, people have seen the mounting physical toll of climate change in fires, droughts, flooding and hurricanes. It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response. I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives. And strikingly, amid all of the disruption of 2020, businesses moved forcefully to confront climate risk. Many companies also responded to calls for racial equity, although much work remains to deliver on these commitments. In one of the great triumphs of modern science, multiple vaccines were developed in record time. Companies have stepped up to support non-profits serving those in need. We saw businesses rapidly innovate to keep food and goods flowing during lockdowns. Capitol are a stark reminder of how vulnerable and how precious a democratic system can be.ĭespite the darkness of the past 12 months, there have been signs of hope, including companies that have worked to serve their stakeholders with courage and conviction. This month in the U.S., we saw political alienation – fueled by lies and political opportunism – erupt into violence. And more recently, it has exacerbated the political turmoil in the U.S. Several months into the year, the pandemic collided with a wave of historic protests for racial justice in the United States and around the world. The pandemic has also accelerated deeper trends, from the growing retirement crisis to systemic inequalities. And although the stock market recovery bodes well for growth as the pandemic subsides, the current situation remains one of economic devastation, with unemployment severely elevated, small businesses shuttering daily, and families around the world struggling to pay rent and buy food. While some industries, particularly those that depend on people congregating in person, have suffered, others have flourished. It sparked the most severe global economic contraction since the Great Depression and the sharpest fall off in equity markets since 1987. The consequences of the pandemic have been highly uneven. It has both exacted a horrific human toll and transformed the way we live – the way we work, learn, access medicine, and much more. But over the past year, we experienced something even more far-reaching – a pandemic that has enveloped the entire globe and changed it permanently. I began writing these letters in the wake of the financial crisis. We have long believed that our clients, as shareholders in your company, will benefit if you can create enduring, sustainable value for all of your stakeholders. This is why I write to you each year, seeking to highlight issues that are pivotal to creating durable value – issues such as capital management, long-term strategy, purpose, and climate change. The trust our clients place in us, and our role as the link between our clients and the companies they invest in, gives us a great responsibility to advocate on their behalf. It is their money we manage, not our own. Most of the money we manage is for retirement – for individuals and pension beneficiaries like teachers, firefighters, doctors, businesspeople, and many others. BlackRock is a fiduciary to our clients, helping them invest for long-term goals.
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