TOKYO -- Institutional investors are voicing concern about the impact of U.S. President Donald Trump's administration on the environment and climate change.
Chairman and CEO Larry Fink of BlackRock, the world's biggest asset management company, writes leaders of global corporations annual letters that have lately called for creating enterprise value from a long-term perspective and an emphasis on environmental, social and governance issues. This year's letter likely sent a particularly strong message as multinational businesses are tested on their commitment to protecting the planet now that Trump has indicated that the U.S. will back out of the Paris Agreement on global warming.
ESG factors "relevant to a company's business can provide essential insights into management effectiveness and thus a company's long-term prospects," Fink wrote.
Participants at the December conference of the International Corporate Governance Network -- whose members comprise mainly large American and European institutional investors -- expressed interest in corporate ESG efforts and information disclosure. Needless to say, their discussions generally suggested strong concern about the Trump administration.
Urged on by these investors, companies are taking a stand.
A coalition of 630-plus businesses and organizations -- including DuPont, Nike, HP, Starbucks Coffee, the California Public Employees' Retirement System and the New York State Common Retirement Fund -- has called on the U.S. to follow through on its commitment to comply with the Paris Agreement.
The group's Jan. 10 open letter was addressed to Trump, then-President Barack Obama, members of Congress, and global leaders, listing the businessman-turned-politician first in an apparent effort to keep an increasingly unilateral-minded U.S. from shifting gears on environmental policy.
Policy under Trump -- who has caused social upheaval with travel restrictions and meddled in businesses' investment plans -- is seriously controversial on not only the environmental front but also from a social and governance perspective. It would be no surprise if investors increasingly question the sustainability of U.S. corporate growth, even with others euphoric about the Dow Jones Industrial Average topping 20,000 on hopes of tax cuts and infrastructure investment.
"Fiduciary duty in the 21st century" is the United Nations-championed concept that fiduciary duty is compatible with investing in companies that seek to balance profits with broader social and stakeholder concerns. Positioning ESG investing as a core tool, it holds that the traditional interpretation of fiduciary duty has meant an excessive focus on profit, leading to short-termism in which stock prices are heavily influenced by quarterly earnings.
Trump's policies are controversial beyond environmental issues, in such areas as diplomacy and trade, and reminiscent of the U.S. in the 1980s. Time will tell how 21st-century investors judge the administration.