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In his annual letter to clients, many of whom lead some of the world's largest companies, BlackRock CEO Larry Fink announced Tuesday his investment firm's new standard for investing: environmental sustainability.
It's a big deal, and it could have serious ramifications for startups and large corporations alike. Fink's annual letter is widely read both inside the finance industry and outside of it, and has a track record of influencing conversations. Two years ago, his missive preached that businesses needed a purpose beyond profits. The Business Roundtable--a group of nearly 200 powerful U.S. CEOs, including Fink--followed suit this past August by announcing new purpose-driven commitments.
Fink's latest letter sends another powerful message. It starts with BlackRock itself--the company intends to exit investments that "present a high sustainability-related risk," and increase the importance of sustainability efforts when investing in new companies. BlackRock will also likely vote against management teams in its portfolio that don't make "sufficient progress" on sustainability over time. It's not immediately clear what this might mean for startups like automaker Rivian and mobile entertainment company Scopely, both of which count BlackRock as an investor.
More broadly, the announcement could serve as a catalyst, accelerating a conversation that's already been happening in business in recent years. On Tuesday, The Wall Street Journal reported on a list of 10 predictions for consumer trends in 2020 from market researcher Euromonitor International. Clean-air activism made the list, as shoppers increasingly gravitate toward eco-friendly retail brands. So did the concept of the circular business model--anything that promotes "sharing, reusing, refilling, and renting to avoid waste."
For a more tangible example, look at San Francisco-based shoe startup Allbirds. The company, founded in 2016, became a unicorn with a $1.4 billion valuation after just two years--making its name partially on its commitment to environmental sustainability. In 2018, the company developed a carbon-negative foam--the production process sucks carbon out of the air--and promptly published the recipe so other companies could manufacture it. This past April, it began self-imposing a carbon tax. In September, Allbirds encouraged its employees to leave work and join a day-long Global Climate Strike.
Back in 2018, while writing about the company, I struck up a conversation about Allbirds with Warby Parker co-founder Neil Blumenthal. He said something that's stuck with me: "It's finally cool to care." Fast-forward to the present. It's clear that Larry Fink now agrees.
His message: It's not just cool to care--caring about the environment might be essential to the long-term success of your company.
Correction: An earlier version of this article mistakenly attributed the list of 2020 consumer trends predictions to The Wall Street Journal rather than Euromonitor International.