A $6 Trillion Double Rainbow. But What Does It Mean?

It's not every day that the CEO of a major investment firm puts out an open letter revising the expectations for corporate governance to include long-term, societal issues.

But despite cracker-jack, timely reporting by the New York Times and the Wall Street Journal, many of us missed it in the day to day swirl of news that consumes our energy and attention.  Sigh, I missed it too, the first time around.

This. Is. A. Big. Deal.  A full-on-double rainbow. (If you don't know that reference, watch the video for a nice chuckle... but not until you read the rest of this post.)  

Even if you don't have time to read Laurence Fink's the full letter, I suggested knowing at least the following three excerpts:

"As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society."

"Stakeholders are demanding that companies exercise leadership on a broader range of issues. And they are right to: a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth..."

"Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that that will help them achieve their goals?"

Not sure what to do next?  My suggestions:

  • If you are a publicly held corporation, now is a good time to assess your corporate social responsibility or community engagement initiatives to ensure your work aligns with the long term vision of your organization, and that your reporting reflects this work. If there are areas of misalignment, consider addressing them quickly and thoroughly: people will be looking.

  • If you are a privately held organization, you may be exempt from the pressures of shareholders, but don't forget that your community and your customers are the same people making up BlackRock's funding sources. Now would be an excellent time to consider the political, regulatory, environmental or societal environment you're operating in, and honestly assess how you're engaging proactively.

  • If you are a nonprofit organization, you'd be well served to bone up on your impact metrics, as it's likely that your corporate partners will be seeking those numbers with renewed vigor as annual reporting time draws near.

There are still a million ways and a million opinions about the best way to manage community engagement and CSR programs.  But I'm thrilled that there's now someone with six trillion dollars betting that we'll figure it out.


FinanceDora LutzComment