Larry Fink, chief executive of BlackRock, has called on companies to find a social purpose in order to generate a long-term sustainable strategy. Photo/Telegraph.
The world's biggest investor has warned companies to make a positive contribution to society or risk losing its support.
In a letter sent to heads of FTSE 100 firms and global business chiefs, Larry Fink, the chief executive of BlackRock chief executive, told companies they must make "a positive contribution
to society" and not just deliver profits for shareholders.
Embracing its role as an activist investor, the $1.7 trillion fund has warned companies they must meet high standards in areas such as being a good employer of a diverse workforce as part of a long-term strategy. Failure to do so could mean firms lose support from stakeholders, the letter warned.
Mr Fink said: "Society is demanding that companies, both public and private serve a social purpose." He added that as governments were "failing" to prepare for the future, the responsibility for this was increasingly falling to companies and investor.
As index funds - which hold a range of investments mirroring an index such as the Dow Jones or FTSE 100 - have become more common, investors find it harder to express "disapproval by selling the company's securities" the letter said. This shift demanded "a new model of shareholder engagement" that goes far beyond the use of "proxy votes at annual meetings".
