Dear CEO: Like every year, my priority is to speak to you on behalf of BlackRock's clients, who in turn are shareholders of your company.

M

ost of our clients invest to finance their retirement

, with a time horizon that can include several decades.

The financial security that we want to help our clients achieve is not achieved overnight. This is a protracted effort for which we take a long-term approach. For this reason, for the last decade I have been addressing you, who are CEOs and presidents of the companies in which our clients invest. I am writing these letters as a fiduciary for clients who entrust us with the management of their assets, in order to highlight the issues that I believe are crucial for them to achieve lasting long-term returns and help them achieve their goals.

When my partners and I founded BlackRock 34 years ago, I had no business management experience at all

. But over the past three decades, I've had the chance to talk to countless CEOs and recognize what makes great companies stand out. What all of them always share is a clear sense of purpose, consistent values ​​and, significantly, a recognition of how important it is to engage with and serve their key stakeholders. This is the basis of stakeholder capitalism,

a type of capitalism that has nothing to do with politics, nor does it follow a social or ideological agenda.

It is not a "woke" capitalism.

It's capitalism, powered by win-win relationships for you and the employees, customers, suppliers and communities your company depends on to thrive.

That is where the power of capitalism lies.

In today's interconnected world, a company must create value for all its stakeholders and be valued by all of them if it wants to provide long-term value for its shareholders.

Thanks to stakeholder capitalism, capital is allocated efficiently, companies see lasting returns, and value is consistently created over the long term.

But

make no mistake, because the legitimate search for profits is still what motivates the markets

and long-term profitability is the barometer by which the latter will ultimately determine the success of your company. One of the foundations of capitalism is its process of constant reinvention, or how companies must continually evolve as the world around them changes if they don't want to be ousted by new competitors. The pandemic has dramatically accelerated the evolution of the operating environment for virtually all companies. It is changing the way people work and consume, creating new businesses while destroying others. But above all, it is drastically accelerating the way technology changes the way we live and do business.

Innovative companies that want to adapt to this environment have easier than ever access to the capital necessary

to realize their vision. And the relationship between a company, its employees and society is being redefined.

COVID-19 has also deepened the loss of trust in traditional institutions and deepened polarization in many Western societies. This polarization poses a whole host of new challenges for CEOs. Political activists or the media may politicize what your company does, or take over your brand to further their own agendas. In this environment, the facts themselves are often questioned, but companies have the opportunity to get ahead.

It is increasingly common for workers to consider their employer as the most reliable

, competent and ethical source of information; more than the government, the media and the NGOs. That's why your voice is more important than ever.

Never before has it been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy and a long-term vision. The purpose of your company is the star that should guide it in this tumultuous context. The stakeholders your company depends on to deliver shareholder benefits need to hear directly from you and feel engaged and inspired by you. They don't want to hear us say, as CEOs, about everything that happens on a day-to-day basis, but they do need to know where we stand on social issues that are critical to the long-term success of our companies. To achieve long-term success, it is essential that the purpose of your company is the pillar of the relationships with your stakeholders.

Employees must understand and connect with your purpose, because when that happens, they can become your strongest advocates.

Customers want to see and hear what you stand for, as they increasingly seek to do business with companies that share their values.

And shareholders must understand the guiding principle behind your vision and your mission.

They will be more likely to support you in difficult moments if they clearly understand your strategy and what is behind it.

A NEW WORLD OF WORK

No other relationship has been changed as much by the pandemic as the one between employers and their employees.

The rate of resignations in the United States and the United Kingdom is at an all-time high.

And

in America we are seeing some of the biggest wage increases in decades.

. The fact that workers take advantage of the new opportunities that are presented to them is positive because it shows their confidence in a growing economy. While employee turnover and rising wages aren't characteristic of every region or industry, employees around the world expect more from their company, including more flexibility and more relevance to the work they do. As companies rebuild from the pandemic, their CEOs are facing a completely different paradigm than the one we are used to. Companies expected their workers to come to the office five days a week. There was hardly any discussion of mental health in the workplace, and wages for low- and middle-income employees hardly increased. But that world no longer exists.

That workers demand more from their employers is an essential characteristic of effective capitalism. It creates prosperity and a more competitive landscape for talent,

forcing companies to create better and more innovative environments for their workers, which will help them achieve greater benefits for their shareholders. Companies that deliver on this strategy are reaping the rewards. Our analysis shows that companies that forged strong relationships with their workers have seen lower levels of employee turnover and higher profitability during the pandemic.

Companies that do not adjust to this new reality and do not meet the expectations of their employees do so at their own risk.

Staff turnover increases costs, reduces productivity and wears down the culture and memory of the company.

CEOs need to ask themselves if they are fostering an environment that helps them compete for talent.

At BlackRock, we're doing just that: working with our employees to navigate this new world of work. Creating that environment is more complex than ever and goes beyond issues like salary and flexibility. In addition to transforming our relationship with the physical place in which we do our work, the pandemic has also shed light on issues such as racial equality, childcare and mental health, while highlighting the different job expectations of each generation.

These issues are now the center of attention for CEOs, who must reflect on how to express themselves and how to connect with social aspects that are important to their workers.

Those who show humility and don't lose sight of their purpose are more likely to form the kind of bond that lasts throughout a person's career.

At BlackRock, we want to understand how this trend is affecting your industry and your company.

What are you doing to strengthen the bond with your employees?

How do you ensure that, wherever your workers come from, they feel secure enough to maximize their creativity, innovation and productivity?

How do you ensure that the board of directors is properly overseeing such fundamental issues?

Where and how we work will never be the same as before.

How is your company culture adapting to this new world?

NEW SOURCES OF CAPITAL ENCOURAGE MARKET DISRUPTION

In the last four decades, we have seen an explosion in the availability of capital. Currently, global financial assets amount to 400 trillion dollars. This exponential growth carries risks and opportunities for both investors and companies, and that means that banks are no longer the only avenues of access to financing. Young, innovative companies have never had such easy access to capital.

Never before has there been so much money available to bring new ideas to life.

, which is fueling a dynamic innovation environment. This means that virtually every industry is teeming with start-ups and disruptive companies trying to unseat the market leaders. CEOs of established companies must understand this changing landscape and the diversity of available capital if they are to remain competitive against smaller, more agile businesses.

At BlackRock, we want to see the companies we invest in on behalf of our clients evolve and grow, generating attractive returns for decades. As long-term investors, we are committed to working with companies from all sectors. But we must also be agile and ensure that our clients' assets are invested, according to their objectives, in the most dynamic companies - whether they are start-ups or established players - with the greatest probability of long-term success. It is our job as investors and managers of capital.

I believe in the ability of capitalism to help people achieve a better future

, to promote innovation, build resilient economies and solve some of our toughest challenges.

Capital markets have allowed companies and countries to prosper.

But access to capital is not a right, but a privilege.

And the duty to attract that capital responsibly and sustainably falls on you.

CAPITALISM AND SUSTAINABILITY

Most stakeholders - from shareholders to employees, customers, communities and regulators - expect companies to contribute to the decarbonisation of the global economy. Few things will affect capital allocation decisions - and therefore the long-term value of your business - more than how you approach the global energy transition in the coming years. It's been two years since I pointed out that climate risk is an investment risk. And in that short time we have seen a major displacement of capital.

Sustainable investments now amount to $4 trillion.

Initiatives and ambitions regarding decarbonisation have also increased

. And this is just the beginning, because the great movement towards sustainable investing continues to gather pace. We will see more money move, in the form of capital pumped into new initiatives focused on energy innovation or capital transferred from traditional indices to more tailored portfolios and products. Every company and every industry will be transformed as part of the transition to a carbon-neutral world.

The question is: will you take the helm or let others direct you?

In just a few years, we have seen how, thanks to innovation, a new automotive sector is conceived. To the point that today, absolutely all car manufacturers participate in the race towards an electric future. But the automobile industry is just the spearhead, because the new sustainable technology will transform all sectors. Engineers and scientists work tirelessly to decarbonise the cement, steel and plastics sectors; maritime, road and aviation transport; and also agriculture, energy and construction. I believe that the current decarbonisation of the global economy will be the biggest investment opportunity of our lifetimes.

Companies that do not adapt will fall by the wayside, regardless of the sector

to which they belong. And just as some companies are at risk of being left behind, so are cities and countries that don't plan for the future. They run the risk of losing employment, even if it is generated elsewhere. The decarbonization of the economy will be accompanied by immense job creation for those who do the necessary long-term planning.

The next 1,000 unicorns will not be search engines or social networks, but sustainable and scalable innovative companies

; start-ups that will contribute to the decarbonisation of the world and will make the energy transition available to all consumers. Admittedly, organic products often come at a higher cost today. Reducing this green premium will be essential for an orderly and just transition. Given the unprecedented volume of capital seeking new ideas, traditional players need to be clear about the path they are following to achieve a carbon-neutral economy. Start-ups are not the only ones that can transform and continue to transform sectors; dominant and brave companies can and should do it too.

In fact, many established companies have the capital advantage, market knowledge and technical expertise on a global scale, factors necessary for the disruptive trends to come. Our question for these companies is: what are you doing to have a disruptive effect on your business? How are you preparing for and participating in the transition to a net zero emissions economy? As your industry is transformed by the energy transition,

will you be among the species that go extinct or among the phoenixes that rise from the ashes?

We focus on sustainability not because we are environmentalists, but because we are investors and trustees of our clients.

That requires us to understand how companies are adapting their businesses to the monumental changes the economy is undergoing.

And within that approach, we ask companies to set short-, medium- and long-term goals for greenhouse gas reduction.

These objectives, as well as the quality of the plans drawn up to meet them, are vital for long-term economic interests.

of its shareholders. This is also why we ask you to publish consistent reports with the Task Force on Climate-Related Financial Disclosures (TCFD), because we believe they are essential tools for understanding a company's ability to adapt to the future. The transition to a net-zero emissions economy is currently uneven, as different parts of the global economy move at different speeds. We must move from the various shades of brown to shades of green. For example, to ensure the continuity of affordable energy sources during this transition, traditional fossil fuels such as natural gas will play an important role both in electricity generation and heating in certain regions and in hydrogen production.The speed of change will be very different in developing and developed countries, although all markets will require unprecedented investment in decarbonisation technologies. We need transformative discoveries such as the electric light bulb and we need to encourage investment in them so that they are scalable and affordable. As we pursue these ambitious goals, which will take time to materialize, governments and businesses must ensure that people continue to have access to reliable and affordable energy sources. This is the only way we will be able to create a green, fair and equitable economy that avoids social imbalances.although all markets will need unprecedented investment in decarbonisation technologies. We need transformative discoveries such as the electric light bulb and we need to encourage investment in them so that they are scalable and affordable. As we pursue these ambitious goals, which will take time to materialize, governments and businesses must ensure that people continue to have access to reliable and affordable energy sources. This is the only way we will be able to create a green, fair and equitable economy that avoids social imbalances.although all markets will need unprecedented investment in decarbonisation technologies. We need transformative discoveries such as the electric light bulb and we need to encourage investment in them so that they are scalable and affordable. As we pursue these ambitious goals, which will take time to materialize, governments and businesses must ensure that people continue to have access to reliable and affordable energy sources. This is the only way we will be able to create a green, fair and equitable economy that avoids social imbalances.We need transformative discoveries such as the electric light bulb and we need to encourage investment in them so that they are scalable and affordable. As we pursue these ambitious goals, which will take time to materialize, governments and businesses must ensure that people continue to have access to reliable and affordable energy sources. This is the only way we will be able to create a green, fair and equitable economy that avoids social imbalances.We need transformative discoveries such as the electric light bulb and we need to encourage investment in them so that they are scalable and affordable. As we pursue these ambitious goals, which will take time to materialize, governments and businesses must ensure that people continue to have access to reliable and affordable energy sources. This is the only way we will be able to create a green, fair and equitable economy that avoids social imbalances.fair and equitable that avoids social imbalances.fair and equitable that avoids social imbalances.

And any plan that focuses solely on limiting supply and failing to address hydrocarbon demand will drive up energy prices.

for those who can least afford it, resulting in further polarization around climate change that will erode gains.

Divesting entire sectors - or simply moving carbon-intensive assets from public to private markets - will not bring the world to carbon neutrality.

And BlackRock is not proposing to do so in oil and gas companies.

We have some clients who choose to divest these assets, while others reject that approach.

Foresighted companies from a wide range of carbon-intensive sectors are transforming their businesses and their actions are a key part of decarbonising.

We believe that companies leading the transition represent an indispensable investment opportunity for our clients and directing capital towards these phoenixes will be essential to achieving global carbon neutrality.

Capitalism has the ability to shape society and act as a powerful catalyst for change

. But companies cannot do it alone, nor can they be the climate police. It would not be good for society. We need governments to clearly mark the roadmap and provide a consistent taxonomy for sustainability policy, regulation and market disclosure. They must also support communities affected by the transition, encourage capital to flow to emerging markets, and invest in the innovation and technology that will be critical to decarbonizing the global economy. Thanks to the collaboration of governments with the private sector, it was possible to develop COVID-19 vaccines in record time. When we combine the power of the public and private sectors we achieve truly incredible things. This is also what we must do to achieve carbon neutrality.

EMPOWER CUSTOMERS WITH CHOICE IN ESG VOTING

Stakeholder capitalism is about long-term, enduring returns for shareholders, so transparency into your company's plans for a net-zero emissions world is an important element. But it is just one of many types of information that we and other investors ask companies to disclose. As managers of our clients' capital,

we ask companies to demonstrate how they will meet their responsibility to shareholders

, which also includes sound environmental, social and governance policies and practices. In 2018, I said we would double the size of our Investment Stewardship team and it remains the largest in the industry.

We created this team to be able to gauge the progress of your company throughout the year, not just during the shareholders' meeting season. It is up to you to chart the course and update us on progress. We want to understand all of the issues you face, not just the ones up for vote, and that includes your long-term strategy. Just as other stakeholders are reviewing their relationships with companies, many shareholders are rethinking their relationship with companies.

We see a growing interest from shareholders - including some of our clients - in the corporate governance of listed companies. That is why we are promoting an initiative to use technology in order to give a greater number of our clients the option of having a say in the way in which proxy votes are cast in the companies in which their money is invested. We currently offer this option to certain institutional clients, including pension funds that support 60 million people, but we are working to expand this universe. We are committed to a future where every investor, including the retail investor, has the option to participate in the proxy voting process if they so choose.

We are aware that, today, there are significant regulatory and logistical obstacles to achieving this, but we believe that it would improve democracy and add more voices to capitalism. Because

all investors have the right to be heard.

We will continue to invest in innovation and work with other market participants and regulators to help make this vision a reality. Indeed, many business leaders are responsible for overseeing equity assets, whether through employee pension funds, corporate treasury accounts, or other investments their company makes. I encourage you to ask your asset manager to give you the opportunity to participate more actively in the proxy voting process. BlackRock's Responsible Investing team remains central to our fiduciary approach and many of our clients prefer that it continue to participate and vote on their behalf.But it is essential that customers at least have the choice and opportunity to participate in voting more directly.

At BlackRock we are convinced that companies achieve better results when they are aware of their role in society

and act in accordance with the interests of their employees, customers, communities and shareholders. However, we also believe that much remains to be learned about how a company's relationship with stakeholders affects long-term value. For this reason,

we have decided to launch a Center for Stakeholder Capitalism

in order to create a forum for analysis, dialogue and debate that will help us to continue exploring the relationships between companies and their stakeholders, and between the involvement of stakeholders with shareholder value. We will bring together top CEOs, investors, policy experts and academics to share their experience and lend their insights. Meeting the conflicting interests of a company's many and varied stakeholders is no easy task. As the CEO that I am, I know this firsthand. In our polarized world, CEOs will always have one set of stakeholders demanding one thing be done and another demanding the opposite be done. That's why it's more important than ever that your company and management team be guided by your purpose.By staying true to your company's purpose and focusing on the long term as you adapt to the new world we live in, you'll achieve lasting returns for shareholders and help spread the power of capitalism to everyone.

Receives a warm greeting,

Larry Fink Founder and CEO

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