Each year I make it a priority to write to you on behalf of BlackRock’s clients, who are shareholders in your company. The majority of our clients are investing to finance retirement. Their time horizons can span decades.
The financial security we seek to help our clients achieve is not created overnight. It is a long-term endeavor, and we take a long-term approach. That is why, for the past decade, I have written to you, as CEOs and Chairs of the companies our clients are invested in. I write these letters as a fiduciary for our clients who entrust us to manage their assets – to highlight the themes that I believe are vital to driving durable long-term returns and to helping them reach their goals.
When my partners and I founded BlackRock as a startup 34 years ago, I had no experience running a company. Over the past three decades, I’ve had the opportunity to talk with countless CEOs and to learn what distinguishes truly great companies. Time and again, what they all share is that they have a clear sense of purpose; consistent values; and, crucially, they recognize the importance of engaging with and delivering for their key stakeholders. This is the foundation of stakeholder capitalism.
Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not “woke.” It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.
In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders. It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long-term. Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success.
Capitalism and sustainability
Most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonizing the global economy. Few things will impact capital allocation decisions – and thereby the long-term value of your company – more than how effectively you navigate the global energy transition in the years ahead.
It’s been two years since I wrote that climate risk is investment risk. And in that short period, we have seen a tectonic shift of capital.3 Sustainable investments have now reached $4 trillion.4 Actions and ambitions towards decarbonization have also increased. This is just the beginning – the tectonic shift towards sustainable investing is still accelerating. Whether it is capital being deployed into new ventures focused on energy innovation, or capital transferring from traditional indexes into more customized portfolios and products, we will see more money in motion.
Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?