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Future-Proof Finance and Larry Fink's Letter (w free signed PDF of his letter)

January 23, 2018

In a world where brevity is valued, we could summarize Fink's letter this way:  contribute to society or else

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We might call Larry Fink's letter a Declaration of Interdependence.  Or a new Bill of (Corporate) Rights--and Responsibilities. Some have called it just a voice in the wilderness or a mere barking of a distant dog in the capital market neighborhood.  After all, the U.S. is in the midst of 109 months of a bullish market with the Dow Jones topping 26,000 (see Figure below).

Image credit: CNN Money


So what's all the fuss about contributing to society?

Things are good, right?  Corporations contribute products, services, jobs, tax revenues and returns for active and passive investors alike.  They contribute an awful lot already (shout out to Milton Friedman).


And yet the experts suggest Larry Fink's letter is like the voice in your GPS that says, "In 500 feet, take a left hand turn."  Fink's letter follows years of work, unnoticed by the general public, by asset owners, asset managers, investment banks, stock exchanges, and regulatory agencies (see Figure below "The rise of interest...").  This work has been reconciling finance and growth with both the biophysical limits of the planet and the human health and human rights limits of communities.

Image credit: Schroder's asset management 


If you study the chart above, you will see that Larry Fink's letter is the GPS to guide companies on a journey that has already begun.  In other words, the $76.3 trillion dollar stock market (The Street, 2017) and $100 trillion bond market (Bloomberg, 2016) are slowly shifting to embrace a more accurate understanding of the underlying value of the market:  namely, that at the final analysis, all this "value" relies on healthy companies which rely on good people (to work well and consume responsibly) and a good planet (to provide resources, metabolize wastes, delight our imaginations, etc).