Larry Fink: Sustainability has come to be seen as a major risk factor and can help separate winners from losers

SAO PAULO – In view of the advance of climate change in the world and the greater demand from investors eager for more sustainable strategies, companies have had to adapt and those that have not changed should be left behind.

In the assessment of Larry Fink, CEO of BlackRock, responsible for around US$9.5 trillion under management at the end of the second quarter, the market has started to consider sustainability as a major risk factor when investing and the issue, it says, will “change capitalism and show who the winners and losers are as capital pursues more sustainable strategies”.

The statement was made this Tuesday (24), during his participation in a panel of Expert XP. Fink said companies that are moving faster and that can be included in more sustainable portfolios are seeing capital flow to them.

“Covid and the risk of losing our life have helped to strengthen people’s view of climate risk and how important it is to ‘Earth’s health.’ In this pandemic, we’ve seen more and more capital going to more sustainable strategies, as well as more investors questioning how they can invest in new technologies to reduce the additional cost of sustainability,” he pointed out.

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The reason for the increase in demand is linked to aspects such as the improvement in the measurement of climate risk. According to the CEO of BlackRock, there are now models in which it is possible to understand whether a certain area has a higher risk of experiencing a flood and whether the investor should charge a higher premium for the investment.

In any case, although the world is undergoing a “drastic” change in the way it assesses climate risk and the impact on asset prices, he considers that there is still no “good measure of transition risk”. For the executive, it is still difficult to measure how fast a company or society itself must move to make the transition to more sustainable strategies and life models.

The only certainty that Fink has is that the need for transformation must require bodies such as the International Monetary Fund (IMF) or the Securities and Exchange Commission (SEC, the US equivalent of the CVM) to demand that companies disclose more transparently how they are doing. this risky transition.

“I believe that banks, for example, will be asked more about how they are measuring portfolio management, how they are relating climate risk to the money they are lending,” said the CEO of BlackRock.

Still on the investment in more sustainable strategies, Fink highlighted that Brazil will play a very important role in this matter by promoting new technologies focused on decarbonization, especially aimed at agribusiness.

Allocation abroad

The eyes of the CEO of BlackRock, however, are not just focused on sustainability. When asked about the high view on the American stock exchanges – the S&P 500 index accumulates gains of around 20% this year and above 30% in 12 months – and if there was room for further appreciation, Fink gave an affirmative answer.

The justification lies in the fact that the Federal Reserve, the US central bank, will continue to invest to keep the US economy functioning, even if it starts to reduce the stimulus program, known as tapering, in this year.

Another reason to remain optimistic about the American stock market is that Fink believes that central banks will continue with more accommodative policies, in terms of interest rates, which also favors the search for risky assets. “I believe that we will have a few more years with risk markets, such as equities, with greater strength.”

One point of attention, however, that may affect variable income pricing, is still inflation. BlackRock’s CEO says he doesn’t see US inflation as transitory and believes it should remain high for a few more years.

“We can see inflation of 3% or 3.5% for years. Could this be a problem? I do not think so. But maybe this causes changes in the models of valuation and the discount that analysts give to some stocks when calculating the return [e precificá-las].”

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