BlackRock’s Fink Calls for Greater Disclosure

26 Jan 2021

In yet another appeal, BlackRock’s Larry Fink called for companies to provide greater climate change related disclosure. Without partnering with the Transparency Label Initiative, there is no reason to think this appeal will be anymore successful than his previous appeals.

Why?

It has little in the way of leverage. As the Wall Street Journal pointed out:

BlackRock can’t just sell out of specific companies at will when investors task it to track indexes.

So how can the world’s largest asset manager get the disclosure it wants and needs in order to know what it owns on behalf of its clients?

It has to turn to other ways to nudge companies.

And this is where the Transparency Label Initiative comes in.

Unlike waiting for the SEC to adopt heavily watered down disclosure regulations, the Initiative is able to act promptly and require the relevant climate change disclosure for each company.

As regular readers know, the Initiative awards its label to companies (and other investments) that disclose all the information investors need in order to know what they own. Naturally, what needs to be disclosed is company (or investment) specific. Included in this disclosed information is climate change related information.

So how does BlackRock gain leverage using the Initiative to compel companies to disclose their climate change related information? Without changing its business model, the Initiative allows the world’s largest asset manager to become a seller of the stock in companies that don’t provide the amount of climate change related disclosure necessary for investors to be able to assess these companies.

How does the Initiative do this?

Much of BlackRock’s business is tracking indexes. There is no reason BlackRock could not roll out index funds that invest only in companies that have a label from the Initiative. As investors move their money from other index funds to these funds, it results in the selling of the stock of the firms that don’t provide the necessary disclosure to qualify for a label.

On behalf of the Transparency Label Initiative, I look forward to working with BlackRock and Mr. Fink to ensure companies provide the necessary climate related disclosure.