Earlier this month, BlackRock issued a report called “Managing the net-zero transition.” The 16-page document offers BlackRock’s insights on where business risks and opportunities may lie as the journey to net-zero carbon emissions unfolds. And according to BlackRock’s data, more than half of major companies and financial institutions now have net-zero commitments. A few points to highlight:
- Brown Before Green – Both this report and Larry Fink’s 2022 letter to CEOs pointed out that the transition won’t happen overnight, and the world will need to pass through shades of brown to reach shades of green, but companies and investors need “a map to plot their journey.”
- Ongoing Costs – BlackRock acknowledges the need for ongoing spend to manage the transition. “A gradual and orderly transition will help mitigate pressure points that could disrupt economic activity and drive up inflation… This will allow time to make the necessary investments, phase out carbon intensive activities, redeploy workers, and develop new technologies to power the net zero economy.”
- Vote for the Long-Term – As the report points out, asset owners and managers must decide how to put capital to work and use their votes to guard long-term interests, and both companies and investors need data, models and analytics to navigate an “increasingly precise map” over time.
The report is likely to be a helpful guide to how BlackRock will look at climate-related disclosures and approach ESG engagement discussions over the months to come, and that includes understanding the link between ESG and a company’s operational metrics.