Impact Alpha, January 16h, 2018: BlackRock just did one thing that changed the game for anyone who invests
I guarantee you that CEOs think about quarterly returns ahead of thinking about what they can do for their community. After the popularization of Milton Friedman’s shareholder theory, investors developed the “fiduciary rule,” where CEOs and boards are required to do what is best for shareholders, and if they intentionally do something that hurts their financial value, they can be sued.
Until now. Larry Fink, chief executive of BlackRock, which manages $6 trillion in investments, told business leaders that if they want to do business with BlackRock moving forward, they’re going to need to contribute to society in addition to making a profit. It’s an enormous step from one of the world’s most influential money managers.
If BlackRock does what it says it’s going to do?—?if they start to sell stocks in companies that can’t firmly demonstrate the impact they are having, it would mean that the stock price of a business will depend, at least in part, on whether or not that business is doing something positive for society. It will mean that a company’s impact?—?positive or negative?—?becomes a painkiller, not a vitamin.