Blackrock CEO Larry Fink has warned Russia’s invasion of Ukraine spells an end of globalisation, while also accelerating the transition toward green energy and digital currencies.
In his annual chairman’s letter, Fink (pictured) said the “speed and magnitude” of company actions in the “economic war” against Russia has demonstrated “the power of capital markets” and what companies and stakeholders can achieve when they “come together in the face of violence and aggression”.
Blackrock has joined other asset managers in barring the purchase of Russian securities from its portfolios. Though it does not have offices in Russia or Ukraine, the $10trn asset manager has exposure to the region via some of its index and active funds and has incurred $17bn in losses as the value of its holdings have been slashed.
However, Fink predicts Russia’s aggression in Ukraine will prompt governments and companies to re-evaluate their dependencies on other countries and could lead some to onshore or nearshore more of their operations.
“The Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades,” he wrote in the 10-page letter to shareholders.
“We had already seen connectivity between nations, companies and even people strained by two years of the pandemic. It has left many communities and people feeling isolated and looking inward. I believe this has exacerbated the polarisation and extremist behaviour we are seeing across society today.”
Ukraine war will accelerate shift toward green energy
A largescale reorientation of supply chains would be “inherently inflationary”, Fink stressed, and create additional challenges for companies, such as higher costs and margin pressures. However, he thinks some countries could benefit from the shift, including Mexico, Brazil, the US and “manufacturing hubs in southeast Asia”.
He also predicted the war in Ukraine will impact the transition to cleaner energy. While countries searching for alternative energy sources will “inevitably slow the world’s progress toward net zero”, longer term he thinks this energy shock will “actually accelerate the shift toward greener sources of energy”, as higher energy prices make renewables and clean technologies “more competitive economically”.
Blackrock was among a slew of fund groups to sign up to the Net Zero Asset Managers Initiative in 2021 to support the goal of cutting greenhouse emissions by 2050 or sooner.
However it has previously been accused of climate inaction.
Blackrock ‘studying’ digital currencies
As the Ukraine war prompts countries to re-assess their energy sources, Fink believes it will also trigger similar discussions on currency. As such he said Blackrock was “studying digital currencies stablecoins and the underlying technologies to understand how they can help us serve our clients”.
“A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption,” he said.
“Digital currencies can also help bring down costs of cross-border payments, for example when expatriate workers send earnings back to their families.”
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