Can Corporations Stop Climate Change?

[0] From the New York Times, I'm Michael Babarro.

[1] This is The Daily, today.

[2] Over the past few weeks, several of America's largest and most profitable companies have unveiled elaborate plans to combat climate change, Andrew Ross Sorkin, on why they're doing it now, and just how meaningful the plans really are.

[3] Plus, the results of the Nevada Caucasus.

[4] It's Monday, February 24th.

[5] Andrew, tell me about this letter.

[6] So every year, usually the second or third week of January, Larry Fink, who runs BlackRock, which is the largest money manager in the world.

[7] They oversee $7 trillion that's with a T. Wow.

[8] Basically 401K plans, pension plans, all of that money lives under BlackRock.

[9] And so Larry Fink has huge influence, and he writes a letter every January to the CEOs of the world.

[10] So I've made it my, I don't want to say life's work, but I've made it my job for the past several years to try to get my hands on this letter because typically what he says changes the conversation.

[11] And it is the letter that sent shockwaves through corner offices across America yesterday, BlackRock CEO, Larry Fink, a warning to corporate leaders about the dangers of short -term thinking.

[12] Back in 2016, he wrote a letter telling CEOs, stop issuing quarterly guidance.

[13] Stop telling us what you expect your earnings to be.

[14] Because then it creates this artificial expectation.

[15] And then you're trying to manage to that number.

[16] And he wants CEOs to think more long -term.

[17] And what happened?

[18] I personally think that's a very good recommendation.

[19] Huge companies, like Unilever, stopped issuing quarterly guidance.

[20] Warren Buffett publicly came out and said that companies should stop issuing quarterly guidance.

[21] It was to give encouragement to companies that really felt uneasy about giving guidance to perhaps have a little more backbone about it.

[22] But Larry Fink was the first.

[23] Okay.

[24] In 2018, Larry Fink wrote a letter.

[25] I've now been to a number of dinners where your letter has already been the topic of conversation.

[26] Saying, you know what, it's not enough simply to have profits.

[27] You have to have purpose.

[28] I believe the involvement in a community to have a purpose is vital for long -term survivability, but long -term profitability.

[29] And then a year and a half later, the business roundtable, which represents all the big companies in the world, said, you know what, it's not just about profits anymore either.

[30] So his letter really has a kind of biblical quality in the world of business.

[31] It has weight.

[32] Because he genuinely is the largest investor in the world.

[33] And as a result, Larry Fink controls huge chunks, stakes in these companies.

[34] And he, to some degree, can control whether people on that board.

[35] The CEO sinks or swims.

[36] He can vote that board out if he doesn't like what they're doing.

[37] In certain cases, he can pull his money from their companies if he doesn't like what they're doing.

[38] Which explains why every year, it seems like you go to pretty extraordinary lengths to get your hands on this letter.

[39] And this year, it's early.

[40] January 2020, and I get my hands on a draft of the letter.

[41] And two paragraphs in, I was stopped cold.

[42] He writes, climate change has become a defining factor in companies' long -term prospects.

[43] 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.

[44] But awareness is rapidly changing, and I believe we're on the edge of a fundamental reshaping of finance.

[45] So what is he really getting on here?

[46] He's saying, for the very first time, as the largest investor in the world, that climate change has to become an integral part of the investing thesis for companies.

[47] And more importantly, that CEOs and companies themselves now have to change and think about climate change.

[48] And if they don't, he's going to be pulling his money from them.

[49] Wow.

[50] You know, and he even says it explicitly in the letter, quote, we will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability related disclosures and the business practices and plans underlying them.

[51] Part of the think assessment is not simply that he's some kind of tree hugger, do -gooder, and wants to change the world.

[52] Though I think he may on a personal basis, but that he thinks that the world has shifted in a way and the climate risk is now so real that it actually will have an economic impact in a way where as a fiduciary for pensioners and investors that he, needs to now push this in a way that he didn't think he had to before.

[53] So it's not an act of advocacy.

[54] It's an act of kind of wise business.

[55] I think he would say this is not driven by ideology.

[56] It's not driven by politics.

[57] It's driven, frankly, by money.

[58] He thinks that there's now a genuine business risk and cost to not doing anything.

[59] To not doing anything.

[60] And maybe even to these businesses.

[61] And therefore, to these investors.

[62] Exactly.

[63] So, right.

[64] A tipping point to reach where you have to do something.

[65] Exactly.

[66] This is the first time that a major investor has genuinely taken on the issue of climate change and said, you know what, corporate America, I know you guys have been talking about this, thinking about this, maybe.

[67] But now you actually have to do something about it.

[68] And if you don't do something about it, investors like me are going to do something about it ourselves, which means that we're either going to vote you out of your job or we're going to pull our money from you.

[69] He's throwing down the gauntlet.

[70] And what are you thinking when you finish reading this letter?

[71] So it's tasting funny.

[72] I know when the letter is going to come out.

[73] It's about a week beforehand.

[74] And I go to a meeting with Satya Nadella, the CEO of Microsoft.

[75] As one does.

[76] As one does, if you're a business reporter who covers companies like this.

[77] And he says that the company is about to reveal a sweeping climate change plan.

[78] Now, of course, I'm thinking in my head, this letter that Larry Fink is about to come out with, are they connected?

[79] What's going on here?

[80] And I later find out, in fact, that Larry Fink had been talking to Microsoft.

[81] And I start to think to myself, you know what?

[82] I think something big is about to happen here.

[83] So what happens when this letter is actually delivered to all these CEOs?

[84] Headlines are everywhere.

[85] Consumer News.

[86] is now one of the biggest airlines in the world has committed to going carbon neutral.

[87] Starting next month...

[88] And literally, within the next 21 days...

[89] This is the decade for urgent action, for Microsoft and for all of us.

[90] Company after company...

[91] The tech giant said it has created a climate innovation fund, which will invest $1 billion over the next four years...