These questions are driving a profound reassessment of risk and asset values. They are seeking to understand both the physical risks associated with climate change as well as the ways that climate policy will impact prices, costs, and demand across the entire economy. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios. Indeed, climate change is almost invariably the top issue that clients around the world raise with BlackRock. Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk. Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts? Research from a wide range of organizations – including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others, including new studies from McKinsey on the socioeconomic implications of physical climate risk – is deepening our understanding of how climate risk will impact both our physical world and the global system that finances economic growth. The evidence on climate risk is compelling investors to reassess core assumptions about modern finance. But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect. And we have a deep responsibility to these institutions and individuals – who are shareholders in your company and thousands of others – to promote long-term value.Ĭlimate change has become a defining factor in companies’ long-term prospects.

It belongs to people in dozens of countries trying to finance long-term goals like retirement. As an asset manager, BlackRock invests on behalf of others, and I am writing to you as an advisor and fiduciary to these clients.

Blackrock ceo letter