BlackRock Inc. CEO Larry Fink called for more action from federal and local governments on the transition toward carbon-free energy production and underscored that regulators are increasingly considering mandatory climate impact disclosure from companies.
"Climate risk has caused a tectonic shift in how we invest," Fink commented virtually at the Mexican Banking Association's 84th annual banking convention on March 12, where he pointed to Bill Gates' recent estimate of $50 trillion needed in funding to reach net-zero carbon emissions as an opportunity.
The fund manager considered battery technology, electric vehicles and new techniques for agriculture as specific examples of investment windows. BlackRock, one of Mexico's largest investors with significant participation in the country's financial and energy sectors, has been one of the most vocal advocates on environmental, social and governance investing.
But while public companies are voluntarily taking action to transition toward greener energy sources, Fink expressed concern about inaction from local and national governments.
"In today's world of rising populism we are not seeing democratic governments worldwide focusing on these issues," the CEO said, adding he has been "pleading to many governments around the world that we need to come together now" for long-term planning that might prevent "a serious problem in 30 years."
For the executive, governments and societies struggle to perceive climate change as an immediate risk similar to COVID-19 because "it does not manifest itself." But if current trends continue, a 2 to 3 degree C increase in global temperatures in 30 years would provoke "dramatic physical changes in the world," Fink noted, adding that parts of the United States are already becoming too hot for corn farming.
Fink recognized, however, that many countries in earlier stages of development face difficulties due to the higher costs associated with certain carbon-free energy sources, although the CEO praised Mexico for "learning very quickly that there is no green premium anymore between hydrocarbons and solar and wind."
The only way to navigate a transition in which no sectors of society are left behind is through collaboration between government and the private sector, Fink continued.
"Industries, companies and countries that are forward thinking about how we are adapting are going to be the ones that benefit," while in "those that deny this or are unwilling to make changes, you're going to see a reallocation [of capital] away from them," Fink warned, although he acknowledged that regulators around the world are increasingly discussing climate risk.
"I must say that every conversation I have, in Mexico, Brazil, Japan, the U.S, when I speak to regulators, each conversation is now more and more dominated by how they should be thinking about climate risk," the CEO said, and whether or not they should make climate disclosure mandatory.
Fink also asked himself if the new Biden administration would promote changes in this regard.
For the fund manager, the recent Texas freeze represented an "outcry" for the United States to have a national power grid that is more highly dependent on renewables such as solar and wind energy.
COVID-19
BlackRock's CEO also referred to the COVID-19 pandemic as having resulted in a more imbalanced society where "there is more inequality than ever before."
President Joe Biden's $1.9 trillion relief package will nonetheless serve to "bridge those who have been harmed ... to [being able to] live until we have vaccinations that are fully distributed and we can have more normal life again," the CEO said.
"While some segments of the global economy flourished during this pandemic, others were quite damaged," Fink said, adding that recoveries will vary across countries and depend on the distribution of the vaccines, among other factors.
For the CEO, the normalization of the economy "may still take a full year."
