BlackRock CEO Larry Fink has called on all the companies that the world’s largest asset manager engages with to publicly set out how they plan to achieve net zero emissions, as he stressed there was “no company whose business model won’t be profoundly affected” by the accelerating green transition.

In his annual letter to CEOs published today, Fink said the asset manager - which looks after around $8.67tr of investments worldwide - was now asking companies to disclose plans for how their business model will be compatible with a net zero economy that limits global warming to well below 2C by the end of the century, in line with the temperature targets of the Paris Agreement.

He said companies in which BackRock has a boardroom say should also disclose both how their net zero plans are incorporated into their long-term business strategy, and how they are reviewed by boards of directors, as he argued embracing sustainability would open up more opportunities and better returns for investors.

During 2020, 81 per cent of a globally-representative selection of sustainable indexes outperformed their parent benchmarks, BlackRock said.

Underpinning these net zero strategies, companies should also use robust reporting frameworks to assess and mitigate climate risks to their business, Fink said, as he argued public disclosures of climate risks should be undertaken through a single reporting standard aligned with the TCFDs.

Public and private companies, as well as issuers of public debt, should all be publicly disclosing how they are addressing climate-related risks in order to help attract more capital in support of net zero infrastructure and climate solutions, according to letter.

“The world is moving to net zero, and BlackRock believes that our clients are best served by being at the forefront of that transition,” Fink writes. “While the transition will inevitably be complex and difficult, it is essential to building a more resilient economy that benefits more people. I have great optimism about the future of capitalism and the future health of the economy - not in spite of the energy transition, but because of it.”

Meanwhile, BlackRock is also aiming to ramp up its own climate efforts over the next year and beyond, as Fink announced plans to set a new 2030 interim target for a minimum proportion of assets it holds to be aligned with the net zero transition.

In the immediate term, too, the asset manager plans to implement a “heightened-scrutiny model” to manage securities that pose significant climate risk, as well as launching a host of new investment products backed by explicit temperature-aligned and net zero-aligned pathway goals. BlackRock’s public equity and bond funds will also soon come backed with a temperature alignment metric, it said.

Every year Fink publishes the general letter he sends out on behalf of BlackRock to company CEOs, highlighting what the asset manager views as the crucial issues and expectations for the year ahead if firms are to create value and mitigate risks to capital.

The asset manager has faced significant criticism from green campaigners in the past for failing to use its hugely influential position to lead robust environmental stewardship of the companies it engages with, and for not taking radical enough action to back away from carbon-intensive investments.

But in recent years, Fink’s annual letters have grown more and more pointed in highlighting the risks and opportunities associated with climate change and the accelerating low carbon transition, and today’s missive marks Fink’s most outspoken call to action on the issue to date.

In the letter, Fink argues the coronavirus pandemic has “accelerated deeper trends” such as systemic inequalities, as well as providing a major jolt to the system by underscoring the threat posed by existential crises such as climate change.

“I believe that the pandemic has presented such an existential crisis - such a stark reminder of our fragility - that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives,” his letter states. “It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response.”

The letter also highlights the increasingly physical toll of climate impacts on the planet such as fires, droughts, flooding, and hurricanes, as well as the deepening negative financial impacts such events are having on company valuations.

Last year energy companies in particular suffered “billions in climate-related write-downs on stranded assets”, as regulators step up their focus on combatting climate risk in the global financial system, Fink writes.

And increasingly, he said, clients and businesses are focusing on “the significant economic opportunity that the transition will create, as well as how to execute it in a just and fair manner”.

“No issue ranks higher than climate change on our clients’ lists of priorities,” the letter states. “They ask us about it nearly every day.”

Fink’s intervention could well prove to be a hugely influential moment for the global financial sector, signalling that BlackRock is intent on ensuring the trillions of dollars of assets it manages worldwide are prepared for a net zero economy by 2050. It also comes at the start of a crucial year for the global economy with governments expected to come forward with enhanced decarbonisation plans ahead of the COP26 Climate Summit in Glasgow in November.

But while BlackRock’s latest pledges were broadly welcomed as a positive move in the right direction by green campaigners, concerns were also raised about the lack of detail underpinning the commitments, such as how the asset manager intended to manage fossil fuel assets going forward.

“It’s a positive sign that BlackRock wants to take its immense responsibility for our climate as the world’s largest asset manager more seriously,” said Katrin Ganswindt, a campaigner at non-profit organisation Urgewald. “What is still lacking, however, are concrete steps on how BlackRock intends to exclude Europe’s leading CO2 emitters such as RWE or CEZ or the entire US coal industry from its portfolio.”

“Achieving net zero by 2050 could mean a lot of things, including offsetting rather than actually reducing emissions,” she added. “To keep up with decent coal policies by other investors such as AXA, Union Investment or Allianz, BlackRock needs to do much more: ditch coal expansionists, start excluding coal power players and lower all thresholds for coal company exclusions close to zero by 2030. As it is now, we just don’t see BlackRock taking enough accountability yet.”