Corbin Client Alert: BlackRock's Annual Letter

3 min. read

BlackRock’s Annual Letter to CEOs

On Tuesday, January 26, BlackRock published its annual letter to CEOs. This highly anticipated letter has become a corporate governance staple and was instrumental in putting ESG issues on the map, particularly within the investment community, just a short few years ago. The 2018 letter called for companies to serve a social purpose; the 2019 letter inextricably linked profits and purpose; the 2020 letter put sustainability at the center of BlackRock’s investment strategy and called for companies to articulate more ambitious strategies around sustainability efforts and planted the climate seed.

Building on last year’s letter, this year’s communique is focused on climate change.

Key Insights

The letter calls for:

A global commitment to a net zero economy¹ by 2050

Companies will be expected to:

Disclose a plan for how their business model will be compatible with a net zero economy
Explain how the plan is incorporated into their long-term strategy
Commit to having the plan reviewed by the board of directors

The letter does not mince words about the seriousness of this appeal and goes on to state that companies without the urgency and agility to respond to this call to action will see their businesses and valuations suffer; we agree, based on proprietary buy side interviews and survey responses on ESG, spanning over a decade

One global standard of sustainability disclosure

Specifically, in support of reporting in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB)

BlackRock published its own inaugural TCFD and SASB reports last year

Note that the letter calls for private companies, in addition to public ones, to disclose sustainability efforts

Enhanced Human Capital Management (HCM)

Disclosure that reflects the company’s long-term plans to improve diversity, equity and inclusion

In case you missed it, please see our Thought Leadership communication from December 11 on the topic

Important data points referenced in the letter:

During 2020, 81% of a globally representative selection of sustainable indexes outperformed their parent benchmarks; this outperformance was even more pronounced during the first quarter downturn, another instance of sustainable funds’ resilience that we have seen in prior downturns
From January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase over the whole of 2019
With the U.S. commitment last week to rejoin the Paris agreement, there are now 127 governments around the world (responsible for 60% of global emissions) considering or already implementing commitments to net zero greenhouse gas emissions

Both the sentiments of the letter as well as the data highlighting the growing importance of Sustainability as an investment strategy are confirmed by Corbin’s own proprietary research and analysis.

As always, we will continue to monitor investor sentiment of ESG issues and share relevant insights with you on a regular basis. Should you want to discuss the specifics of the BlackRock letter or anything mentioned above, please Contact Us.

The letter defines a net zero economy as one that emits no more carbon dioxide than it removes from the atmosphere and where global warming is limited to well below 2 degrees Celsius, consistent with a global aspiration of net zero greenhouse gas emissions by 2050