World’s biggest investment fund, with $7 trillion in assets, preps for climate change

"In the near future — and sooner than most people expect — there will be a major shift in how capital is allocated," writes Larry Fink, CEO of BlackRock, the world’s largest asset manager with over $7 trillion under management, in his annual letter to shareholders and CEOs. Fink argues that climate change will be the main force behind this transformation. As weather patterns become more extreme and sea levels rise, every sector of the economy will feel the pressure. Even something as fundamental as the 30-year mortgage may need to evolve, since it's becoming harder to predict property values over such long periods when environmental risks are growing. The insurance industry is also facing similar challenges. How can you accurately price flood insurance when a "100-year flood zone" now floods multiple times within a decade? These shifts are not just about the environment — they're about how we manage risk and value assets in an unpredictable world. Beyond the direct impact of climate change, government responses will play a big role too. BlackRock expects more regulations that set emission limits and introduce carbon pricing mechanisms. These policies will influence everything from energy costs to land values, creating ripple effects across markets. In its letter, BlackRock states: *"Investors are increasingly recognizing that climate risk is investment risk. From Europe to China, investors are asking how they should adjust their portfolios. They want to understand both the physical risks of climate change and how policy changes will affect prices, costs, and demand."* There's also a growing awareness that a climate-driven collapse isn't just a distant threat — it's bad for business. Companies are starting to see sustainability not just as a moral obligation, but as a strategic necessity. Fink adds: *"We’re facing the ultimate long-term challenge. We don’t yet know which climate predictions will hold true or what we’ve overlooked. But one thing is clear — we’re moving in a direction that can’t be ignored."* So, what can an average investor do? BlackRock’s strategies — like pushing for more sustainable practices, divesting from coal, and preparing clients for regulatory shifts — are largely aimed at institutional investors. But there are still some lessons for individual investors. Real estate, once seen as a safe bet, is getting riskier. Coastal areas are particularly vulnerable, but even places like California face rising wildfire threats and power outages. Traditional real estate wisdom may no longer apply. Insurance has been a solid investment for decades, but changing risk profiles could make it less predictable. And while gold is often seen as a safe haven, governments have historically intervened in its market — like during the Great Depression. Ultimately, I can’t tell you exactly where to invest. But reading BlackRock’s message feels like a warning: the future is uncertain, and turbulence is on the horizon. That means focusing on the basics — paying off debt, building up cash reserves, and preparing for unexpected disruptions. It's the kind of prudent approach that always makes sense, especially when the world is changing so fast.

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