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January 23, 2020

Why BlackRock Just Put a Big Stake in the Ground for Sustainability/ESG

Written by Don Scales
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Leading investment fund BlackRock has $90 billion worth of assets in oil, coal, and gas. But BlackRock’s future is changing dramatically in a more sustainable direction. According to BlackRock CEO Larry Fink, the $7 trillion investment company will divest from fossil fuels to greener investments amid a climate crisis. In his annual CEO letter to shareholders, Fink wrote,

Climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect. But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.

Consequently, he wrote BlackRock will undertake a number of significant changes in its investment approach, including “making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening our commitment to sustainability and transparency in our investment stewardship activities.”

BlackRock Makes a Bold Move

In addition, BlackRock will “be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”

Wow. This is a major statement coming from a company that influences the global investing agenda. In addition, Larry Fink’s letter has invariably raised questions about which companies will now benefit from the reallocation of capital into more sustainable investment choices.

A Broader Shift Toward Purpose-Driven Companies

BlackRock’s actions are part of a broader shift occurring in the investment world into companies that align their profits with purpose. Approximately $8.7 trillion under professional management in the United States is invested according to socially responsible investing strategies, according to the Forum for Sustainable and Responsible Investment. Millennials, the largest age cohort in the United States, are twice as likely as the overall investor population to invest in companies that prioritize environmental and goals, according to Morgan Stanley.

As BlackRock Larry Fink wrote, “The importance of serving stakeholders and embracing purpose is becoming increasingly central to the way that companies understand their role in society . . . Ultimately, purpose is the engine of long-term profitability.”

This shift is occurring also because consumer preferences are changing. Nearly 70 million Americans will spend up to 20 percent more on environmentally sound products, according to the Retail Industry Leaders Association. The handwriting is on the wall: acting in sustainable fashion is both right and sensible. 

Investment Relations Professionals Are In the Driver’s Seat

To me, these developments, writ large by BlackRock, underscore the importance of investment relations professionals to help businesses articulate their own commitment to sustainability/ESG. As I wrote in a recent Forbes column, “How To Effectively Tell Your Brand's Sustainability/ESG Story,” acting in sustainable fashion and telling your brand’s story are two different things. A business can make incredibly effective changes to the way it sources and creates products in sustainable fashion – but unless the business tells its story effectively, its efforts will stay below the radar screens of purpose-driven investors.

Here is where IR professionals come into play. Good ones already know how to tell their company’s investment story to attract investors. They can tell the story of the company’s ESG agenda in so many ways, among them:

  • Do their homework on how their own investors’ agendas are changing and coach their leadership teams accordingly. Be the critical link between investor sentiment and C-level priorities.
  • Craft messages in clear, concise language that helps investors understand the approach their companies take to embrace sustainability/ESG, including the investments they are making.
  • Collaborate with corporate comms to make the story for investors consistent with the narrative shared to customers and employees. In my book, How to Lead a Values-Driven Professional Services Firm, I discuss how businesses can and should rally around their brand purpose in order to manage every aspect of their operations more profitability. Chances are that an IR professional’s peers inside the company are figuring how to renew their brand narrative around purpose. That narrative will be more credible when everyone is sharing it consistently.
  • Provide tangible examples of how a business’s efforts around ESG are paying off financially, such as attracting purpose-driven customers and employees.
  • Coach the CEO and CFO to incorporate a stronger story about ESG in their earnings announcements, briefings, event appearances, and everywhere else they discuss their company’s performance.
  • Capitalize on digital tools to tell the company’s sustainability/ESG story. In the age of visual storytelling, IR professionals need to show their story as much as tell it, such as using video case studies, interviews with company executives, to name just a few ways.

These are just some best practices. There are many more. We talk in more detail about sustainability/ESG in our recently published white paper, The New ESG Agenda. I encourage you to check it out.

Contact Investis Digital

At Investis Digital, we regularly analyze and score corporate brands on how well they’re leveraging their ESG/CSR story digitally. We combine strategic insight with original ideas to create a sustainability narrative that’s relevant and compelling for all your audiences. We suggest assessing your corporate brand to better understand gaps and opportunities around leveraging your story to drive business impact. Contact us to learn more.

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