Jan 26, 2021 - Economy & Business

Larry Fink to CEOs: Climate risk is investment risk

Illustration of the earth on a large pile of money
Illustration: Eniola Odetunde/Axios

The biggest investor in the world has an unambiguous message for the CEOs of the companies he invests in: climate risk is investment risk.

Why it matters: Pressure from BlackRock CEO Larry Fink, who controls $9 trillion, will encourage companies to report not only what their greenhouse gas emissions are today, but also what they're doing to ensure that their future emissions are in line with Paris Agreement targets that end at zero in 2050.

  • Fink announced today that he has already begun to vote his shares against managers and directors that fail to show "significant progress on the management and reporting of climate-related risk, including their transition plans to a net zero economy."

Driving the news: 61 of the world's largest companies signed on to common standards today that will allow investors to compare their progress against each other on an apples-to-apples basis.

  • The standardized metrics are global, and — crucially — have been signed onto by all four of the big accountancy companies. Deloitte, EY, KPMG and PwC will ensure that all companies calculate the metrics the same way.
  • They're applicable to all companies, public or private, regardless of industry or region.
  • The new standards will make life a lot easier for regulators, investors, or anybody else who wants to to judge companies not just on carbon emissions but on many other areas from water consumption to the amount of tax they pay.

Early adopters include Bank of America, Fidelity, Heineken, IBM, Mastercard, McKinsey, Nestlé, PayPal, Sony, Unilever, and many others.

  • What they're saying: "It's about companies setting clear metrics, measuring our progress, and holding ourselves accountable,” said Salesforce CEO Marc Benioff.

What's next: There's still a lot further to go. No regulators have mandated reporting of these standards, which aren't yet included in GAAP accounting principles.

The bottom line: "This is not the end, it's the beginning," EY CEO Carmine di Sibio told Axios.

  • Many companies will report these metrics voluntarily — but the lowest performers won't report their numbers unless and until they have to.
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