What is Capitalism? Who can know better than Larry Fink, founder and CEO of BlackRock, the largest manager in the world, with over $10 trillion in assets under management. “Stakeholder capitalism has nothing to do with politics, it does not fit into any social or ideological agenda. It is not a 'woke' instance. It's capitalism, leveraging the mutually beneficial relationships between you and your employees, customers, suppliers, and the communities your company relies on to thrive. This is the power of capitalism,” writes Fink in his annual letter sent to CEOs of the companies in which BlackRock invests. Eight pages in which one of the most powerful men in the world urges companies to commit to guaranteeing long-term profitability, defending his approach to capitalism, but also invites them to review their relations with workers, finally taking stock of energy transformation in progress.
RELATIONSHIP WITH EMPLOYEES
According to Fink the pandemic has revolutionized the labor market: “No relationship has undergone more changes due to the pandemic than that between employers and employees. In the United States and the United Kingdom, the rate of dismissal is at an all-time high", underlines Fink, also referring to the phenomenon of "great discharge".
It is not, he points out again, a transitory wave. “Employees around the world are demanding more from their employers, including more flexibility and more meaningful tasks.” CEOs, for their part, are faced with “a radically different paradigm. Previously, “normality required employees to go to the office five days a week. Mental health was rarely talked about in the workplace and the wages of low- and middle-income workers were barely growing.' Now "that world no longer exists” and “companies that do not adapt to this new reality, and do not follow up on the requests of their employees, do so at their own peril. The turnover of the workforce increases expenses, lowers productivity and erodes corporate culture and memory”, he adds, underlining that in addition to subverting the relationship with the physical place, the pandemic has changed perspectives on issues such as ethnic equality, childcare and mental health. According to the founder of BlackRock, “these issues are now taking center stage for CEOs, who need to think carefully about how to use their voice to create synergies on social issues that are important to their employees”.
THE ENERGY TRANSITION
After announcing two years ago the decision of fight against unsustainable companies, Fink returns to talk about the energy transition, admitting that, to date, “green products often cost more. Reducing this surcharge will be essential to be able to implement an orderly and just transition”, argues the number one of BlackRock, according to which “every company and every sector will be transformed by the transition to a zero-emissions world: the next 1.000 unicorns they won't be search engines or social media companies, they will be sustainable and scalable innovators: startups that help the world to decarboniseif".
However, we must avoid counterproductive leaps forward: “Before arriving at a green world we will have to go through various shades of brown and green – he writes –. For example, to ensure the continuity of affordable energy supplies, while transitioning from traditional fossil fuels, such as natural gas, will play an important role”. Having "reliable and affordable" energy sources is "the only way to have a fair and just green economy and avoid social conflict", continues the manager.
Fink says corporations themselves cannot play the role of “climate police” but should instead collaborate with governments. “Disinvestment from entire sectors – or, simply, the shift of carbon-intensive assets from public to private markets – will not result in achieving the net-zero emissions goal,” he argued in the letter. “Capitalism has the power to shape society and act as a powerful catalyst for change,” he added. businesses cannot do it alone, and they cannot set themselves up as climate carabinieri. It would not be a good result for the company. We need that governments provide clear pathways and a consistent taxonomy for sustainability policy, regulation and disclosure in markets”.
However, Fink has no doubts: sustainable investing will continue to grow. “Decarbonizing the global economy will create the biggest investment opportunity of our lifetime. And it will leave companies that don't fit behind,” she concludes.
