Stakeholder capitalism was top of the agenda in the annual letter penned by BlackRock chair Larry Fink to the chief executives (CEOs) of companies the firm has a stake in, as he stressed the importance of considering shareholder values when taking action.
He said investors deserved more involvement in company decision making, especially on environmental, social and governance (ESG) issues, which have become increasingly important to how people invest.
BlackRock set up the industry’s largest stewardship team in 2017 to allow shareholders to vote on how the committee advises companies on ESG matters.
However, Fink said investors need to “participate in voting more directly” and encouraged CEOs to open up avenues for stakeholders to have additional involvement in company affairs.
He said: “We are committed to a future where every investor – even individual investors – can have the option to participate in the proxy voting process.”
The Centre for Stakeholder Capitalism – forum of industry experts – has been set up by BlackRock to promote the idea.
Sustainability was also highlighted as a crucial area of improvement for companies, with ESG investments now reaching $4trn (£3trn).
A rapid rise in ESG funds was boosted by agreements made at COP26 in October last year and many corporations have since rushed to add sustainable mandates to their company policies.
Fink noted that global business is accelerating towards net-zero emissions one way or another and companies that fail to adapt to sustainability demands risk being left behind.
He said: “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?”
Despite this, firm will continue to invest in oil and gas companies. BlackRock’s £133m Energy and Resources Income trust, for example, has 33.6% of assets in traditional energy. However, it also has 24.1% holdings in energy transition.
Fink suggested that rather than abandoning the sector, it would benefit more from innovation in carbon-reducing technologies.
Excess capital floating around the system – global financial assets are at around $400trn – should be directed towards developing solutions to these sustainability issues, he said.
Fink added: “I believe the decarbonising of the global economy is going to create the greatest investment opportunity of our lifetime.”
Innovation is also needed within the internal structure of corporations, Fink said. Covid has redefined the workplace by reducing contact hours in office and brought the mental health of employees to the forefront.
BlackRock research found that companies with a strong relationship with their staff had lower levels of turnover and higher returns throughout the pandemic.
Therefore, Fink urged companies to “show humility and stay grounded” not just for their employees wellbeing, but for the corporation’s own success.