- BlackRockCEO Larry Fink said at the New York Times Dealbook Conference that within five years, all investors will be using ESG (environmental, social, and governance) metrics.
- In January, Fink wrote in his annual letter to CEOs that all companies must outline their purpose.
- Fink explained his prediction is based on a demand from consumers and employees.
- This article is part of Business Insider’s ongoing series on Better Capitalism.
When BlackRock CEO Larry Fink proclaimed in his annual letter in January that, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he says he wasn’t doing it “to be en vogue,” or, as Wall Street Journal columnist Holman W. Jenkins, Jr. wrote, to “buy indulgences” with the public.
“We’re trying to improve the performance of our clients,” Fink said at The New York Times DealBook Conference in New York on Thursday. He also predicted that in the near future, all investors will be using ESG (environmental, social, governance) metrics to determine the value of a company.
“I do believe that the demand for ESG is going to transform all investing,” he said, referring to both passive and active investors. “Now, that may be one or five years away from now, but it’s not that far away.”
BlackRock manages $US6.4 trillion in assets, making it the world’s largest asset manager, and Fink’s letter has been a topic of conversation on Wall Street all year. He told host Andrew Ross Sorkin that what compelled him to write the call for purpose in the first place was an accumulation of proof that both customers and employees needed businesses to have a dimension of meaning beyond maximizing shareholder gains, and that social media spread perceptions of businesses more widely and faster than ever.
In October, BlackRock predicted that assets in ESG-focused exchange-traded funds (ETFs) would grow from $US20 billion to more than $US400 billion by 2028.
Fink predicts that benefits to all shareholders – employees, communities, customers, society as a whole – will be taken seriously by all investors out of necessity. Boston Consulting Group’s research into the subject has found that ESG-driven decisions implemented well go far beyond good marketing, and actually boost the bottom line because they are more sustainable than decisions made to boost stock price in the short term. But as Fink noted, there’s not going to be a mass shift until more of that data is collected and metrics are agreed upon across industries.
He sees it as inevitable, and fast approaching. “The interest in ESG is becoming overwhelming,” he said.