As CEO of asset management giant BlackRock, Larry Fink has the ear of businesses and governments. In the past, he has given credibility to concepts like socially responsible business and corporate action on climate change.
In an investor advisory published Tuesday, Mr. Fink addresses a new topic: the impending global pension crisis and the measures needed to address it.
The gray peril
The way pensions are managed around the world needs to change, writes Mr Fink. Many countries will reach a demographic tipping point within 20 years and most people are not saving enough for retirement, he writes.
In the United States, in particular, life expectancy is expected to continue to increase with weight-loss drugs like Wegovy, Mr. Fink writes. However, four out of ten Americans do not have $400 in the bank in case of emergency, much less the money for a decent retirement.
“We need a high-level structured approach to ensure a dignified old age for future generations,” he writes, calling for a state-private company collaboration like the one that led to the revival of semiconductor manufacturing in the United States. United.
Mr. Fink reiterates his unique perspective on the problem: more than half of the $10 trillion managed by BlackRock is intended for retirement.
Difficult questions, crucial decisions
He makes some suggestions to launch a debate which will be difficult, he warns:
– establish pension funds covering all workers (even part-time workers), as 20 American states have already done;
– encourage employers to match employees’ contributions and facilitate the transfer of contributions if an employee changes employer;
– create company savings plans with predictable income approaching that of a real retirement fund, in order to reverse the recent negative trend in the United States, which Mr. Fink describes as a shift “from financial certainty to financial uncertainty.”
Mr. Fink also mentions a politically delicate idea: raising the retirement age. He recalls that American Social Security calculates that, by 2034, it will no longer be able to pay full benefits.
No one should be forced to work longer than necessary, he writes, “but I find it a little crazy that our central idea of the retirement age – 65 – dates back to the same era as the Ottoman Empire.”
Mr. Fink takes the opportunity to defend eco-responsible investment. His company has become the target of the American right since it advocates the ESG (environmental, social and governance) approach. According to him, the transition to green energy is inevitable.
“It is a megaforce, a major economic trend in countries representing 90% of global GDP,” he writes. (However, he stopped using the term “ESG” because of its political charge.)
He advocates “energy pragmatism” according to which the energy security of many countries will involve relying on hydrocarbons for years to come while gradually replacing them with cleaner energy sources.
“No one will support decarbonization” if it involves a cold house in the winter and a hot house in the summer, “or if the cost of decarbonization is prohibitive,” he writes.
Mr. Fink adds that BlackRock has not advocated divestment from fossil fuel companies, because some of them are investing in green technologies like air carbon capture.
This article was published in the New York Times.
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