Risks for existing businesses grow as ‘dynamic’ market frees up capital for entrepreneurs.

In the next episode of ASB’s Investor Insight series, we look at key considerations for businesses and investors – in New Zealand and around the world.

CEOs of major companies need to think about how they can disrupt themselves to evolve and grow, a leading investment strategist believes.

Ben Powell, APAC Chief Investment Strategist for BlackRock Investment Institute, based in Singapore, says the dynamism of capital markets has led to a situation where "there is frankly so much capital available for entrepreneurs that, combined with the internet, (this) has led to a situation where more and more companies are being disrupted."

"The disruption mindset isn't just for a couple of 20-something-year-olds in the back bedroom - I think that's for all of us as we think about how we can flourish over the years and decades ahead."

Powell was commenting on BlackRock CEO Larry Fink's latest open letter to business leaders in an interview with Chris Tennent-Brown, ASB Wealth's Senior Economist. The interview is part of a series delving into what current market conditions mean for investors and the outlook ahead.

The whole conversation with both Powell and BlackRock Australia's Head of Investment Stewardship Iris Davila can be seen in the accompanying video.

Powell says CEOs of existing companies need to be very mindful of the risks from disruption on the one hand but also, of course, the opportunities.

"The challenge is can CEOs of existing companies that have been around for a long time, can they think about how they disrupt themselves and become the next better version of the company?"

BlackRock CEO Larry Fink. Photo / Supplied.

Powell says another aspect covered by Fink in his letter explores the risks associated with sustainability. "It is very clear to us that (the risks), positively and negatively, can impact the value of one's holdings."

"So we think of it as an absolutely foundational part of our investment process; we reject the idea of having sustainability as an add-on or adjacent to our investment process."

Powell says for BlackRock sustainability risk is investment risk, in much the same way that inflation, interest rates and other macroeconomic variables – such as those that are influencing increased market volatility at the moment- can impact the value of investor holdings.

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Davila says BlackRock is focused on promoting long-term sustainable value on behalf of clients and, in order to do that, she believes companies need to think about various stakeholders they're committed to – employees, customers and the communities they operate in.

"When Larry (Fink) started writing these letters 10 years ago it was really trying to focus a company to think about those long-term sustainable business practices that would benefit clients."

Fink's letters are on BlackRock's website at https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter. ASB podcasts and blogs discussing the letters and market updates can be found on the ASB website at www.asb.co.nz/investor-hub

# These are entirely ASB's own views, not investment advice. However, there are plenty of experts at ASB who are qualified to provide financial advice. To find out more talk to an ASB specialist or visit asb.co.nz/investment-advice