Larry Fink is an influential guy. A name synonymous with success and making money.
He’s an American billionaire whose name sounds like a character in a cartoon or family sitcom, rather than the man who heads up Blackrock – the American investment firm that happens to be the largest fund management firm in the world, with assets of more than $6.5 trillion.
So when Larry sends a letter, people pay attention to what he is saying. It’s not an exaggeration to say that his words can influence how companies operate around the world.
The ‘fuss’ this time is because Larry has highlighted that Blackrock’s investment strategies place a high importance on how a company’s operations impact on its people, places and the environment. It’s not just about the money.
It was once described to me how Blackrock was considered the golden ticket for a company seeking investment. If Blackrock showed an interest in buying shares in your company, you drop everything and do whatever it takes to secure that investment.
That’s a bit extreme, I admit. But an example of just how influential the views of Larry and Blackrock are perceived around the world.
At the start of each year, Larry writes a letter to CEO’s and investors to highlight some of Blackrock’s investment strategy and key areas of focus. He voices concerns and generally explains what type of investments he sees Blackrock making in the next 12 months and beyond.
This year’s letters have just been issued, in which Larry made detailed references to the importance of ESG – environment, society and corporate governance. In more simple terms, that actually mean something to you and me, this refers to how a business operates in terms of its impact on the environment, its workforce and the communities it operates in, along with how the company is managed and led.
Basically, how the company has a positive impact on things other than making profits, such as how it actually cares for its employees and the environment. It’s not just about chasing the money, as Larry has clearly stated in his letters.
It’s increasingly being recognised that making money is not the only driver for being in business. There are other factors that indicate success, or as serious accountants or finance people refer to as KPI’s (Key Performance Indicators).
Over Christmas, I watched the film “The Wolf of Wall Street” starring Leonardo DiCaprio as Jordan Belfort, who epitomises the attitudes of many working in finance in the late 80’s. His now infamous quote sums up the attitude that was prevalent at the time;
“There’s no nobility in poverty. I’ve been a poor man, and I’ve been a rich man. And I choose rich every ******* time.”
Jordan Belfort – The Wolf of Wall Street, 1987
It’s a film I have been meaning to watch for some time and it didn’t disappoint.
Set in the late 80’s, it graphically shows the greedy, obsessive and often selfish views of those making stacks of money on Wall Street, with little regard to who and how people were impacted in their quest to make even more. I appreciate that I am generalising here, but I am sure you get the gist.
It wasn’t just on Wall Street that this was happening. A thirst for the fast life and the drive to earn the money that could pay for it was a common attitude of many people working in finance around the world at that time, albeit not always to the extremes that the film depicts!
But move on 30 years or so and things have at last turned a corner in the financial world. Unfortunately, the planet has suffered in that time, and employees have often been subjected to some pretty harsh attitudes to working life, with financial target driven bosses and disregard for personal lives.
These days, caring for the environment and how you look after your workforce are actually beginning to carry weight with a more broad-minded investment community, who are increasingly demanding to see evidence that a company is operating in a sustainable way, both financially and non-financially.
That is why Larry’s letters reinforcing this view, issued this week, were big news in the investment world.
He makes some bold statements about finance and significant changes in attitudes in the future;
Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance…
Every government, company, and shareholder must confront climate change…
In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.
Larry Fink – Chairman and CEO, Blackrock, January 2020
At last, you may say, it’s being recognised that making money is not what it’s all about. Happiness, well-being and caring for the world around us are also things to strive for, rather than the greed-fuelled ambitions of ‘Jordan Belfort’ type characters, as depicted in the film.
Over the last couple of years, there has been an evolving trend in communicating more transparently a company’s attitude to people and the environment. My only concern is whether companies are communicating these attributes for the right reasons, and that it is evidenced with factual substance behind the words and images that are seen on websites, investment marketing collateral and annual reports.
Now that Larry has communicated his thoughts so directly through his letters, let’s hope that the business world continues to think of the environment and people just as importantly as its profits in the months and years ahead.
In summary, my 3 key points from all of this are;
- Successful companies must ‘do good’ as well as make money (it’s official, as Larry has confirmed).
- Larry Fink is certainly no cartoon character.
- The ‘Wolf of Wall Street’ is a brilliant film, if only because it allows me to be relieved that the world has moved on.
stephosborn 