Climate Change: BlackRock Making A Statement. What will they do? Should they?

Today, BlackRock CEO, Larry Fink announced he was sending his 2020 letter to CEOs of companies that BlackRock invests in. And with $7 Trillion dollars in assets under management that's a lot of influence. So what was his message this year?

Really, it followed the same lines as his last couple of letters. A focus on the massive impact climate change will have on investors and companies. He is continuing to urge companies to confront climate change. So what is he hoping to change and why does it matter to investors?

Let's start with the first half of that question. He is hoping to use his influence as the head of a company managing over $7 trillion dollars to urge companies to take climate change seriously. After-all BlackRock has the ability to send waves through the corporate world by using their stakes in a company to vote in a manner that can force change and outlooks for a company. They could also choose not to invest in a company that they don't believe is properly preparing for the affects that climate change may have on their business.

Now to the second part of the question. Why does it matter to investors? Well, if it is important enough for one of the largest asset managers in the world than it must be important to even the small investors. And quite frankly it is simple. If a companies stock is valued based on their future earnings. And that same company will be impacted by climate change in the future. We need to understand the impact of climate change in order to understand if our investment in a particular company is a good value. Further, if the largest asset managers choose to stop investing in certain companies because of climate change or other ESG issues that could have a significant impact on the valuation of those companies.

We don't yet know how serious BlackRock is or the steps they are willing to take to make a statement on climate change or other social issues. But should they be? Are asset managers out-of-line to use the dollars they manage to punish or reward companies based on what they believe is socially responsible?