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World's Largest Money Manager: Companies Must Respond to Social and Climate Challenges

Business
Jim Henderson / Wikimedia Commons

The world's largest publicly traded companies must take a more active role in solving social issues or face blowback from investors, the CEO of BlackRock said Tuesday.

"To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society," Laurence Fink wrote in his annual letter to CEOs of companies in which BlackRock invests. BlackRock is the world's largest money manager, with more than $6 trillion in assets.


The letter notifies CEOs that BlackRock will take a more active role in paying close attention to companies' involvement in social issues and urges companies to "understand the societal impact of your business as well as the ways that broad, structural trends—from slow wage growth to rising automation to climate change—affect your potential for growth." The letter follows several well-publicized moves from BlackRock to pressure ExxonMobil to disclose climate risk to investors.

As reported by the New York Times:

"It may be a watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism. 'It will be a lightning rod for sure for major institutions investing other people's money,' said Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management and an expert on corporate leadership. 'It is huge for an institutional investor to take this position across its portfolio.' He said he's seen 'nothing like it.'

In a candid assessment of what's happening in the business world—and perhaps taking a veiled shot at Washington at the same time—Mr. Fink wrote that he is seeing 'many governments failing to prepare for the future ... '"

"As a result," Fink added, "society increasingly is turning to the private sector and asking that companies respond to broader societal challenges."

For a deeper dive:

New York Times, Washington Post, WSJ, FT, NPR, Business Insider. Commentary: Bloomberg Gadfly, Stephen Gandel analysis

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Up to half of the detrimental impacts of the "landscape simplification" that monocropping entails come as a result of a diminished mix of ecosystem service-providing insects, a team of scientists reported Oct. 16 in the journal Science Advances.

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SHARE Foundation / Flickr / CC BY-NC 2.0​

"Our study shows that biodiversity is essential to ensure the provision of ecosystem services and to maintain a high and stable agricultural production," Matteo Dainese, the study's lead author and a biologist at Eurac Research in Bolzano, Italy, said in a statement.

It stands to reason that, with declines in the sheer numbers of insects that ferry pollen from plant to plant and keep crop-eating pests under control, these services will wane as well. But until now, it hasn't been clear how monocultures affect the number and mix of these species or how crop yields might change as a result.

Aiming to solve these questions, Dainese and his colleagues pulled together data from 89 studies cutting across a variety of landscapes, from the tropics of Asia and Africa to the higher latitudes of northern Europe. They tabulated the number of pollinating and pest-controlling insects at these sites — both the absolute number of individuals and the number of species — along with an assessment of the ecosystem services the insects provided.

In almost all of the studies they looked at, the team found that a more diverse pool of these species translated into more pollination and greater pest control. They also showed that simplified landscapes supported fewer species of service-providing insects, which ultimately led to lower crop yields.

The researchers also looked at a third measure of the makeup of insect populations — what they called "evenness." In natural ecosystems, a handful of dominant species with many more individuals typically live alongside a higher number of rarer species. The team found as landscapes became less diverse, dominant species numbers dwindled and rare species gained ground. This resulting, more equitable mix led to less pollination (though it didn't end up affecting pest control).

"Our study provides strong empirical support for the potential benefits of new pathways to sustainable agriculture that aim to reconcile the protection of biodiversity and the production of food for increasing human populations," Ingolf Steffan-Dewenter, one of the study's authors and an animal ecologist at the University of Würzburg in Germany, said in the statement.

The scientists figure that the richness of pollinator species explains around a third of the harmful impacts of less diverse landscapes, while the richness of pest-controlling species accounts for about half of the same measure. In their view, the results of their research point to the need to protect biodiversity on and around crops in an uncertain future.

"Under future conditions with ongoing global change and more frequent extreme climate events, the value of farmland biodiversity ensuring resilience against environmental disturbances will become even more important," Steffan-Dewenter said.

Reposted with permission from our media associate Mongabay.