Russia’s invasion of Ukraine will reshape the world economy and further increase inflation, driving companies away from their global supply chains, warned BlackRock Chief Executive Larry Fink.
“The Russian invasion of Ukraine put an end to the globalization we have experienced over the past three decades,” Fink wrote in his annual letter to shareholders of BlackRock, which manages $10 trillion as the world’s largest asset manager.
While the immediate result was Russia’s complete isolation from capital markets, Fink predicted that “companies and governments will also be looking more broadly at their dependence on other countries. or near, resulting in faster withdrawal from some countries”.
“A large-scale reorientation of supply chains will be inherently inflationary,” Fink wrote, in a ten-page letter that also addressed the effect of the Russian invasion on the energy transition and cryptocurrencies, and which updated investors on the company’s lines of business. BlackRock and the reopening of its main offices.
The letter did not mention any specific countries that would be harmed by the changes, but Fink wrote that “Mexico, Brazil, the United States or manufacturing centers in Southeast Asia could benefit.” Other investors argued that the latter group could replace China, where BlackRock last year launched a suite of retail investment products.
Fink advocates that the companies in which BlackRock invests act more in relation to climate change. His letter predicted that the Russian invasion would affect the transition to cleaner energy.
Initially, the search for alternatives to Russian oil and natural gas “will inevitably slow the world’s progress towards [emissões] net zero in the short term,” he wrote.
“In the long term, I believe recent events will really accelerate the shift to greener energy sources” because higher fossil fuel prices would make a wider range of renewables financially competitive, he wrote.
While climate activists want investors to ditch fossil fuels entirely, Fink rejected that approach, as he did in his January letter to chief executives. “BlackRock remains committed to helping customers navigate the energy transition. This includes continuing to work with hydrocarbon companies,” he wrote. “To ensure continued affordable energy prices during the transition, fossil fuels such as natural gas will be important as a transition fuel.”
In one of his first comments on cryptocurrencies, Fink drew attention to the “potential impact of the war in Ukraine on accelerating digital currencies. A carefully designed global digital payments system can improve the settlement of cross-border transactions while reducing the risk of money laundering.” money and corruption”.
He told investors that due to growing customer interest, BlackRock is studying digital currencies and the underlying technology.
Fink lamented to his shareholders the rough start for the financial markets this year, in which BlackRock’s shares have dropped nearly 20%. “I share your disappointment with the performance of our stocks this year. But we’ve faced challenging markets before. And we’ve always managed to come out better and more prepared on the other side,” he wrote.
He also noted that the company is coming off “the strongest organic growth in its history” in 2021, when dynamic markets and growing interest in alternative assets and exchange-traded funds brought in $540 billion in net inflows.
Looking ahead, Fink made it clear that BlackRock wants employees to return to offices, but will not be among employers insisting on a full return to pre-pandemic norms.
“Working together, collaborating and developing our employees personally is essential to the future of BlackRock,” he wrote. “There are certain conversations that cannot be replicated in a video call. We lose the space, creativity and emotional connectivity that comes from being together in person.”
“At the same time, we recognize that the pandemic has redefined the relationship between employers and employees. To retain and attract best-in-class diverse talent, we need to maintain the flexibility of working from home at least some of the time,” said Fink.
Translated by Luiz Roberto M. Gonçalves
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