Last week, Larry Fink, Chairman and CEO of BlackRock, one of the worlds largest investment firms, drafted his annual letter and set his intentions for the company in stone. No longer would Blackrock support businesses with financial goals only – ‘every company must not only deliver financial performance, but also show how it makes a positive contribution to society’ he wrote to the CEO’s of BlackRock’s supported firms. It’s a huge stand to take but is it what’s needed in our endeavour to create a better future?
Now that the dust has settled, we can reflect on the claims made and take a look at what they really mean for the future of business, investing and the wider global impact.
Thankfully, the world of business has moved on quite a bit since Friedman’s ‘Stockholder Theory’ in the seventies, and there’s now a growing understanding from business leaders across the globe of their obligations towards supporting a more sustainable future.
A sustainable business is one which focusses on people, planet AND profit.
BlackRock has now set a benchmark for companies seeking investment to aspire towards, not only by appealing for businesses to do good, but by suggesting an investor’s view of a business’s sustainable growth is based as much on social and environmental impact as it is on profits. In other words, if this investment appraisal system is rolled out, you could have the most profitable business in the world but if you’re not satisfying an investor’s needs, they’ll value your business accordingly.
Blackrock’s intentions back a growing trend in impact investing.
The Global Impact Investment Network (The GIIN) provide a definition – ‘Investments made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return.’
Impact investing has been around for decades but momentum around the investment strategy and its contribution towards a more sustainable future certainly seems to have increased over the last few years.
So too has the number of investors looking to make more from their money than financial return and seeing impact investing as a way to achieve blended returns whilst focussing on their desired mission (whether it be socially or environmentally intended.)
Larry Fink has the influence to set standards in the financial & investment industries. His views on creating stakeholder value as a benchmark for investment appraisal should push business leaders to incorporate these responsible business practices into their everyday, developing long-term sustainable strategies.
It’s good to see people taking a stand on these important issues, and who knows, maybe this stand will eventually lead to a new norm for business and help pioneer a more sustainable future.