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 letters to shareholders and CEOs.

Fink argues that this transformation will be driven by climate change, as its effects become more pronounced across all sectors. From agriculture to real estate, businesses are beginning to face the reality of unpredictable weather patterns and rising sea levels. Even something as fundamental as the 30-year mortgage could be disrupted, as it becomes harder to predict property values over such a long period in an increasingly unstable environment.

The insurance industry is also feeling the pressure. How can insurers accurately price flood coverage when a "100-year flood" now occurs every few years? The very models that once guided risk assessments are being upended by the new normal of extreme weather events.

It's not just climate change itself that’s reshaping markets — government responses will play a huge role too. BlackRock expects more aggressive regulations on emissions and carbon pricing mechanisms that force industries to adapt. These regulatory shifts will have ripple effects, and asset managers must factor them into their long-term strategies.

In its letter, BlackRock states:

Investors are increasingly aware of these issues and recognizing that climate risk is investment risk. Climate change is consistently the top concern raised by clients globally — from Europe to Australia, South America to China, Florida to Oregon. They want to know how to adjust their portfolios, understanding both the physical risks of climate change and the economic impacts of evolving policies.

Beyond market forces and client concerns, there's a growing recognition that business cannot thrive in a world ravaged by climate disasters. More companies are stepping up to be part of the solution, not just for ethical reasons, but because the climate crisis is bad for profits.

Fink puts it plainly: “We're facing the ultimate long-term challenge. We don't yet know which climate predictions will prove accurate or what we've overlooked. But one thing is clear — we’re heading in a dangerous direction.”

What an individual investor can do

If you're interested in all the steps BlackRock is taking — like pushing companies to improve sustainability, divesting from coal, and preparing clients for regulatory changes — check out the full letter. These are big-picture moves that only a fund of BlackRock’s size can execute, so they may not directly apply to everyday investors.

But there are still some key takeaways worth considering. For example, real estate — long seen as a safe bet — is becoming riskier. Traditional wisdom like “buy land, it’s not getting any more” or “when there's blood in the streets, buy real estate” might not hold in a world where wildfires, floods, and rising seas threaten property values. Coastal areas like Florida or even wildfire-prone regions like California are no longer guaranteed safe investments.

Insurance has historically been a solid investment, with Warren Buffett building much of his empire through insurance. However, with shifting risk profiles, the profitability of insurance companies could be in question. Actuarial models are outdated, and this could reshape the entire sector.

Precious metals like gold are often seen as a safe haven during uncertainty. While that may still be true, history shows governments can impose restrictions — like FDR’s gold confiscation in the 1930s. So, gold isn’t always a foolproof option.

Ultimately, I can’t tell you exactly what to invest in. But BlackRock’s message is clear: the future is uncertain, and turbulence is coming. That means it’s time to focus on the basics — pay down debt, build an emergency fund, and prepare for unexpected disruptions. In a volatile world, being financially resilient is more important than ever.

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