Larry Fink, CEO of BlackRock, said this week in his annual letter to CEOs that companies need to disclose how they will get to a net-zero greenhouse gas emissions business model. This is further recognition that ESG (environment, social and governance) factors are now the basis on which institutional investors are putting money into the market.
But Fink didn’t stop there. He took climate risk to a systems-level by observing that “In the past year, people have seen the mounting physical toll of climate change…They are also increasingly focused on the significant economic opportunity that the transition will create, as well as how to execute it in a just and fair manner…the transition will inevitably be complex and difficult, it is essential to building a more resilient economy that benefits more people.” Bottom line? If business fails to include equity in its calculation, there won’t be a low-carbon economy to invest in. The hammer wielded by Fink is his own strategy for making sustainability BlackRock’s “new standard for investing.” In 2020, the firm achieved its goal of having 100 percent of its active and advisory portfolios ESG-integrated.
Now that sustainability is mainstream for investors the next shoe to drop is living wages. Last week, Alan Jope, CEO of Unilever, committed to raising living standards by “ensuring that everyone who provides goods and services to the company earns at least a living wage by 2030.” The company went further by committing to “spend €2 billion annually with diverse suppliers, by 2025. These suppliers will be small and medium-sized businesses owned and managed by women, under-represented racial and ethnic groups, people with disabilities and LGBTQI+.” Unilever said it will also train and equip 10 million young people “with essential skills to prepare them for job opportunities by 2030.” This is a direct intervention by a private sector actor on a systems-level to eliminate social inequality.
Unilever’s commitment answers the challenge posed by Paul Tudor Jones, legendary investor and founder of JUST Capital, who called on companies to close the wealth gap by prioritizing their employees. In a call hosted by PayPal earlier in the week, Jones said that “one-half of the workers who work for American companies do not make a living wage.” This concern was echoed by PayPal CEO Dan Schulman, who last year launched a global Employee Financial Wellness program to increase employees’ Net Disposable Income. Following extensive internal research, which demonstrated that despite offering wages that were at or above market rates, half of PayPal’s employees were “struggling to make it at the end of every month,” PayPal increased base wages, where appropriate, enhanced benefits, and made every single employee a shareholder.
Jane Nelson, the Director of the Corporate Responsibility Initiative at Harvard Kennedy School, said the corporate responsibility to pay employees and workers a living wage is one of the next big items on the business leadership agenda. “It is unconscionable that so many of the essential workers who are helping to protect the lives and support the livelihoods and learning of millions of people, are themselves struggling to make ends meet. The financial health and wellbeing of all employees and workers must become a priority for business leaders, alongside physical and mental wellbeing.”
The global pandemic has exposed the seamy underbelly of society; as exemplified in the 3 to 1 higher rates of mortality for Black and Hispanic citizens versus whites due to Covid in the U.S. The actions of BlackRock, Unilever and PayPal indicate that business is prepared to take the lead in fighting the twin evils of climate change and inequality.
Richard Edelman is CEO.