BlackRock CEO calls ESG sign of “operational excellence”

Laurence Fink, chief executive of BlackRock, the largest institutional investor in US public stock markets, has issued his annual letter to the CEOs of Standard & Poor's 500 companies. With four areas of specific emphasis, including ESG, the letter states that BlackRock views a focus on ESG matters by companies as a signal of “operational excellence.” The letter also calls for movement away from short-term guidance to long-term strategic plans and greater integration of compensation committees and strategic plans for companies. Notably absent from the letter was a call for CEOs or directors to have more direct engagement with stockholders.

BlackRock, with $4.6 trillion of assets under management, is the largest institutional investor in U.S. public stock markets. So when Chief Executive Officer Laurence Fink issues his annual letter to CEOs of Standard & Poor’s 500 companies, they generally listen. “This year’s letter had one notable omission and four areas of specific emphasis that merit the attention of boards and management,” according to Ethan Klingsberg and Elizabeth Bieber of Cleary Gottlieb Steen & Hamilton in this recent blog post. Here’s what you need to know:

• Direct engagement: “Notably absent from the 2016 letter is a call for CEOs or directors to have more direct engagement with stockholders,” say Klingsberg and Bieber. In the past, they say letters suggesting this have “overloaded” communication between public companies and institutional investors.