BlackRock’s Fink says investors are shifting to ESG-focused firms

CEO says companies that best embrace 'stakeholder capitalism' are outperforming their peers and will continue to do so.

BlackRock Inc. Chief Executive Larry Fink said how companies approach environmental, social and governance issues has become a defining factor for investors.

“We are seeing this reallocation of capital,” Fink said at a Bloomberg New Economy Forum event broadcast Thursday in Hong Kong.

“Those companies who are more and more focused on ESG strategies and stakeholder capitalism, they’re trying to get a higher P/E than some of the companies that are in denial,” he said.

Many companies have evolved from a primary focus on maximizing shareholder profits to one in which they also prioritize their impact on clients, employees and the communities in which they operate, Fink said in an interview with Carlyle Group Inc.’s David Rubenstein. The companies that best embrace “stakeholder capitalism” are outperforming their peers and will continue to do so, he said.

The comments mirror statements made in his annual missives to U.S. CEOs, in which he has advised corporate leaders to orient their businesses for the long term and sought to underscore that profit and social purpose are inextricably linked.

Fink made climate change the focus of his 2020 letter, saying global warming will upend global finance and promising his firm will take steps to address the issue across the thousands of companies in which it invests.

President-elect Joe Biden’s decision to return the U.S. to the Paris climate agreement will be “monumental” and would support the work of the growing number of investors that have focused on climate change, Fink said.

“It’s going to be important now to have the whole global community come together, but I would just say, over the last four years, we’ve been seeing a large transformation from private investors,” said Fink. “They’re looking for more opportunities to participate in this giant change.”

The New Economy Forum is organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.

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