Companies wait expectantly for the annual CEO letter from Larry Fink, chief executive of BlackRock, the world’s biggest fund manager. This year’s does not disappoint.

Doubling down on previous commitments to beating climate change, and in the wake of Joe Biden’s decision to return the US to the Paris agreement, Fink calls on boards to publish plans to make their companies fit with a net zero economy.

This should not be a surprise. There has been a push in the UK, Europe and elsewhere around the world to have companies report on their efforts to beat climate change.

Last year, Fink’s letter said BlackRock would be increasingly inclined to “vote against management and board directors” when companies fall short on making sustainability disclosures. But this latest call pushes boards to consider their role in the effort to achieve achieve net zero carbon emissions by 2050. The UK became the first government to introduce this target in 2019.

“Given how central the energy transition will be to every company’s growth prospects,” writes Fink, “we are asking companies to disclose a plan for how their business model will be compatible with a net zero economy—that is, one where global warming is limited to well below 2 degrees C, consistent with a global aspiration of net zero greenhouse gas emissions by 2050.”

The pandemic, far from providing a distraction from climate change, says Fink, has proved such an “existential crisis” it has provided a stark reminder of “our fragility” and caused the world to “confront the global threat of climate change more forcefully”.

Fink not only wants disclosure of a net zero plan, he wants to know how the objective has been included in long-term strategy and how boards have reviewed their plans.

Fink also renews BlackRock’s support for a “single global standard” for sustainability reporting and says private companies should also be using the TCFD reporting framework. Fink calls this “the global standard for helping investors understand the most material climate-related risks that companies face”. The UK is in the process of making TCFD reporting mandatory.

“If we want these disclosures to be truly effective—if we want to see true societal change—they should be embraced by large private companies as well,” writes Fink.

Diversity disclosures

Racial equality also figures in Fink’s letter, a response to the Black Lives Matter protests that followed the death of George Floyd in Minneapolis last year.

Fink’s letter also comes in the same week the World Economic Forum launched a new campaign, backed by 48 multinationals including BlackRock, aimed at putting racial equality on board agendas.

In a passage on company purpose and the importance of stakeholders, Fink says a company that fails to call on the “full spectrum of human talent is weaker for it”.

There is, therefore, a new reporting demand. “As you issue sustainability reports, we ask that your disclosures on talent strategy fully reflect your long-term plans to improve diversity, equity and inclusion, as appropriate by region.”

Fink finishes with a reminder for board to place their stakeholders front and centre of their thinking. “As we move forward from the pandemic, facing tremendous economic pain and inequality, we need companies to embrace a form of capitalism that recognises and serves all their stakeholders.”

Fink stresses the vast movement of capital toward sustainable assets. He warns that better technology is enabling investment managers to offer customised options to more people, tilting funds further toward sustainability.

As he writes, “…this will have such a dramatic impact on how capital is allocated, every management team and board will need to consider how this will impact their company’s stock.”

Boards have been warned.