Capitalism to the Rescue?

Global warming is one of the topics I occasionally cover for the simple fact that it is impacting anglers in Central Oregon.  Our rivers and ocean are heating, fish are being impacted, and fishing closures due to heating are becoming more frequent.  The impacts on anadromous fish (salmon, steelhead) are the most dramatic, but they are only the canaries in the coal mine.  While our government continues to ignore this critical issue there is a growing awareness in many parts of the business community that action must be taken, and soon.

You would have to make a deliberate choice to ignore the news to not see constant reminders that our planet is warming at a dangerous pace.  2019 was the second hottest on record.   The oceans are warming faster than the rest of the planet, disrupting food chains and endangering fish and animals that feed on them like seabirds.

In the face of governmental denial and inaction, however, important elements of the business community are establishing plans to take action.  BlackRock is the world’s largest investor/money manager.  Last week their CEO, Larry Fink, released his highly influential annual letter to CEOs of companies titled “A Fundamental Reshaping of Finance”.

Here’s an excerpt from this welcome letter:

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.

The evidence on climate risk is compelling investors to reassess core assumptions about modern finance. Research from a wide range of organizations – including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others, including new studies from McKinsey on the socioeconomic implications of physical climate risk – is deepening our understanding of how climate risk will impact both our physical world and the global system that finances economic growth.

This re-frames the discussion as one of investor risk, risk that companies will introduce to their shareholders if they do not move to sustainable operating models.  As a professional investor / financial advisor I can confidently state this is language that will change the dialogue in boardrooms and investor discussions across the country.

BlackRock is far from alone is this call for sustainablility.  Last month, the World Economic Forum released the Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution.   The manifesto begins with this statement:

The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large. The best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.

One of those policies includes the following.

It acts as a steward of the environmental and material universe for future generations. It consciously protects our biosphere and champions a circular, shared and regenerative economy. It continuously expands the frontiers of knowledge, innovation and technology to improve people’s well-being.

Also read, Why we need the ‘Davos Manifesto’ for a better kind of capitalism.

I am not naive enough to think that dramatic, widespread changes towards sustainability is imminent, but these statements would never have been made by the leaders of important economic entities until recently.  They are still not being made by our political leaders.