BLACKROCK chairman and chief executive Larry Fink spelt out a framework for stakeholder capitalism in his 2022 letter to shareholders, raising the alert that companies need to foster loyalty among employees and that capital must be responsible if a net-zero world is to materialise.

Fink is an influential voice in capital markets, thanks to BlackRock's heft: As at end-December 2021, it manages US$10 trillion in assets. In recent years, his annual letters have raised awareness of the urgency of sustainability issues and nudged companies and investors to action. It manages around US$509 billion in sustainable assets across all businesses, more than double from a year ago.

In the latest just-released letter for 2022, he spelt out 4 aspects of stakeholder capitalism, defined as capitalism "driven by mutually beneficial relationships between you (the client) and the employees, customers, suppliers and communities your company relies on to prosper''.

The 4 aspects relate to how the pandemic is reshaping the world of work; new sources of disruptive capital; the need to harness public and private sectors to speed up the net-zero transition; and the empowerment of shareholders to vote on ESG (environmental, social and governance) issues.

He said Covid-19 has deepened the erosion of trust in traditional institutions and exacerbated polarisation in Western societies. It is important, he said, that chief executives step up to inspire stakeholders. "It's never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy and a long term view... Putting your company's purpose at the foundation of your relationships with your stakeholders is critical to long term success.''

On the first aspect of how Covid-19 has accelerated shifts in the work environment, he said employees around the world are looking for more from their employer, including more flexibility and more meaningful work. "Workers demanding more from their employers is an essential feature of effective capitalism. It drives prosperity and creates a more competitive landscape for talent, pushing companies to create better, more innovative environments for their employees - actions that will help them achieve greater profits for shareholders.'' BlackRock's research shows that companies that have forged strong bonds with their staff have lower levels of turnover and higher returns through the pandemic.

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In November, US workers quit their jobs in record numbers, according to the US Labour Department, a trend labelled as the Great Resignation, partly driven by Covid burnout and also by a higher level of job openings.

The second aspect is the "explosion'' of available capital. Global financial assets today total US$400 trillion. Young, innovative companies, Fink said, have never had easier access to capital.

Capital is fuelling a "dynamic landscape of innovation'' and an abundance of disruptive startups trying to topple market leaders. CEOs, he said, need to understand the landscape and the diversity of available capital to stay competitive in the face of smaller, more nimble businesses.

Capital also comes with responsibility. "Access to capital is not a right. It is a privilege. And the duty to attract that capital in a responsible and sustainable way lies with you.''

The third aspect is the importance of partnership between governments and private companies in driving the transition to net-zero emissions. Fink noted that the transition to net-zero is already uneven, and will need to "pass through shades of brown to shades of green''.

The availability of affordable energy supply will be important and this means traditional fossil fuels will play an important role for power generation and heating.

"As we pursue these ambitious goals - which will take time - governments and companies must ensure that people continue to have access to reliable and affordable energy sources. This is the only way we will create a green economy that is fair and just and avoid societal discord.''

BlackRock does not pursue divestment from oil and gas companies as a policy. "Divesting from entire sectors - or simply passing carbon-intensive assets from public markets to private markets - will not get the world to net zero.''

Businesses, he said, cannot act as "climate police''. Governments must provide clear pathways and support communities affected by the transition, and also invest in innovation and technology essential for decarbonisation.

Last year BlackRock partnered Temasek to launch Decarbonisation Partners which will invest in late-stage venture capital and early-growth private equity funds focused on decarbonisation solutions. The partners aim to commit US$600 million in initial capital.

The fourth aspect is to facilitate the use of technology to give more clients a say in how proxy votes are cast. "We are committed to a future where every investor - even individual investors - can have the option to participate in the proxy voting process if they choose... I encourage you to ask that your asset manager gives you the opportunity to participate in the proxy voting process more directly.''

BlackRock has begun an initiative to use technology to give clients a say on proxy votes. This option, called "voting choice'', is offered to certain institutional clients including pension funds that support 60 million people.