BlackRock CEO Larry Fink says all investors will soon use ESG metrics

BlackRock CEO Larry
Fink.
AP

• BlackRock
  CEO Larry
  Fink said at the New York Times Dealbook Conference on
  Thursday that within five years, all investors will be using
  ESG (environmental, social, and governance) metrics.
• In January, Fink wrote in
  his annual letter to CEOs that all companies must outline
  their purpose.
• Fink explained his prediction is based on a demand from
  consumers and employees.
• This article is part of Business Insider’s ongoing series on
  Better
  Capitalism.

When BlackRock CEO Larry Fink proclaimed in his annual letter in
January that, “To prosper over time, every company must not only
deliver financial performance, but also show how it makes a
positive contribution to society,” he says he wasn’t doing it “to
be en vogue,” or, as Wall Street Journal columnist
Holman W. Jenkins, Jr. wrote, to “buy indulgences” with the
public.

“We’re trying to improve the performance of our clients,” Fink
said at The New
York Times DealBook Conference in New York on Thursday. He
also predicted that in the near future, all investors will be
using ESG (environmental, social, governance) metrics to
determine the value of a company.

“I do believe that the demand for ESG is going to transform all
investing,” he said, referring to both passive and active
investors. “Now, that may be one or five years away from now, but
it’s not that far away.”

Read more: Everyone
at Davos talked about ‘Larry’s letter’

BlackRock manages $6.4 trillion in assets, making it the world’s
largest asset manager, and
Fink’s letter has been a topic of conversation on Wall Street
all year. He told host Andrew Ross Sorkin that what compelled him
to write the call for purpose in the first place was an
accumulation of proof that both customers and employees needed
businesses to have a dimension of meaning beyond maximizing
shareholder gains, and that social media spread perceptions of
businesses more widely and faster than ever.

In October, BlackRock predicted that assets in ESG-focused
exchange-traded funds (ETFs) would grow from $20 billion to

more than $400 billion by 2028.

Fink predicts that benefits to all shareholders — employees,
communities, customers, society as a whole — will be taken
seriously by all investors out of necessity.
Boston Consulting Group’s research into the subject has
found that ESG-driven decisions implemented well go far beyond
good marketing, and actually boost the bottom line because they
are more sustainable than decisions made to boost stock price in
the short term. But as Fink noted, there’s not going to be a mass
shift until more of that data is collected and metrics are agreed
upon across industries.

He sees it as inevitable, and fast approaching. “The interest in
ESG is becoming overwhelming,” he said.