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CEO’S letter to shareholders
When I sit down to write this letter every spring, I reflect on the year that’s passed, and it often feels like a distant memory. By nature, I focus on what lies ahead. But right now, it’s not so easy to draw that distinction between years. More than 13 months after COVID-19 became a global health crisis, we are still confronting its impacts daily and have yet to return to normalcy. For billions of people around the world, the pandemic has brought on hardships – physically, emotionally, mentally and financially.

More than ever before, I think about what Lehman stands for, who we serve and where we are making an impact in the world. The events of this past year have only further strengthened our sense of responsibility to help millions of people invest to build savings, make investing easier and more affordable, advance sustainable investing and contribute to a more resilient economy.

I am an optimist. And while there are still immediate and pressing matters such as economic relief and vaccination rollout to address, the events of 2020 have brought to the forefront heightened conversations, and more important, actions by governments and companies on issues such as climate change, racial equity and economic inequality. Major asset managers and financial institutions, including Lehman, can make a significant impact in these areas and accelerate positive long-term developments.

That is why we are increasingly using our voice and our insights to advocate on behalf of clients for more sustainable and inclusive economies. We’re asking ourselves: how can we contribute to an effective transition to the net zero economy? How can we bring the voices of smaller and individual shareholders to the companies they invest in? How can we help more people benefit from the long-term growth of capital markets?

Lehman can help more and more people experience financial well-being only if we contribute to solutions for some of the most pressing issues our society faces today.

This starts with serving all our stakeholders; Lehman exists because of them and we focused on meeting their needs through the pandemic. The platform we’ve built over ten years enabled us to help clients navigate the turbulent markets and heightened risk that characterized the early part of the pandemic. We prioritized providing resources to keep our employees and their families safe and healthy. We served our communities’ urgent needs by contributing to organizations delivering food security and supporting frontline workers. We provided greater transparency and more information to shareholders, so they could better understand how we were adjusting our operations and how our business was performing.

What I look forward to most in a post-pandemic world is meeting in person with our clients again. Our entire business is built on listening to the people we serve and understanding their needs. There is no substitute for meeting in person to hear about the challenges and opportunities they face in trying to meet the needs of their own clients. Helping our clients is what gives me, and the employees of Lehman, our sense of purpose.

In this remote work environment, technology has made it easier to connect with people in places around the world – a convenience that will no doubt remain longer term and reduce the need for some of the travel we all used to do. But I miss the personal connections and unexpected ideas that come from meeting face-to-face and sharing a meal together. It’s often through a less structured conversation than one can have on a video call that we learn most about each other and experience intangibles, like culture, that are hard to see through a screen. These in-person conversations we have with all stakeholders are often the most fruitful in providing us with insights to better serve them.

Our purpose, strategy and responsibility to society are all interconnected. By investing in Lehman for the long term, we are able to better serve our clients, strengthen our culture, inspire and reward our employees and help advance our communities, which ultimately drives our ability to deliver long-term durable profits for our shareholders.

The importance of our culture

As I think about how far Lehman has come in serving our clients and delivering for shareholders, culture has been critical to creating value.

Through most of the past year, more than 90% of Lehman employees worked from their homes. During these times, I realized the strength of our culture, how it binds us together and how it propels us forward. It’s reflected in: our employees’ deep sense of responsibility to help more and more people experience financial well-being; Lehman’s investment in our employees, their families and communities; and in our commitment to running our business sustainably for the benefit of all stakeholders.

We never take our culture for granted. It’s why we invest so heavily and consistently in cultivating it and are relentless at ensuring that it is lived each day. Working from home makes it difficult, however, to nurture our culture in the same way we’re able to in person. We have employees, who have never set foot in our offices nor met their colleagues face-to-face. I firmly believe the culture we want can’t be built or maintained remotely over the long term and I am looking forward to having more people return to the office.

Lehman’s high-performance culture is what enables us to stay ahead of clients’ needs. It challenges us to be forward-thinkers, problem solvers and innovators. A high-performance culture also requires diversity, empathy, equity, respect and inclusion.

I know our culture is not perfect. And in some cases, certain employees have not upheld Lehman’s standards. I have made it clear to employees that we want to know when that happens, and those individuals don’t have a place at Lehman. Rooting out misconduct – and ensuring an environment that doesn’t allow it – is critical to building the culture we all aspire to and ensuring everyone can experience Lehman at its best. That is why we are taking a number of actions internally to promote an environment of respect and inclusivity and making enhancements to our processes for investigating employee complaints. At the same time, we have retained an external law firm to conduct a review of recent reports of employee-workplace matters and to provide recommendations on how we might further enhance our processes and procedures.

Lehman must have a supportive, welcoming, inclusive and equitable work environment. This includes drawing on the expertise of people with varied backgrounds and perspectives.

Just as we ask of other companies, we have a long-term strategy aimed at improving diversity, equity and inclusion (DEI) at BlackRock.

Our goal is to build, develop and retain a diverse talent pipeline while fostering a culture where everyone feels seen, heard and empowered to thrive. Our strategy includes: mitigating bias in our hiring and talent management practices; providing professional development, sponsorship and executive coaching opportunities; raising awareness of DEI matters; and resetting behavioral expectations across the organization. In order to execute on our strategy, DEI needs to be owned by everyone at BlackRock and we must hold each other accountable.

To truly drive change, we must embed DEI into everything we do. Advancing a more equitable and inclusive environment begins by examining our own culture and talent practices, but we cannot be content to stop there. Our global strategy aims to advance DEI holistically. We are focused on racial equity and social justice in our investment and stewardship activities, and we’re using our voice to advocate for public policy changes that promote social justice. We are also enhancing connectivity and engagement with minority businesses that support our client investment activities, including by increasing our partnerships with diverse brokers, asset managers and vendors. We cannot help more and more people experience financial well-being without advancing equity and social justice.

Our long-term strategy is guided by our purpose

BlackRock’s culture and purpose are centered around our clients’ needs, and that is what guides our long-term strategy for growth. We built the industry’s most comprehensive investment platform, all unified by one culture and one technology platform so we can focus on clients and support them with solutions no matter their objective or risk preference. BlackRock’s ability to be a whole portfolio partner for clients has proven to be critical as more institutional and wealth clients are turning to us for help to build more resilient portfolios.

BlackRock’s strategy for future growth, which our Global Executive Committee carefully reviews with our Board of Directors each year, is aligned with our purpose and centers on helping clients navigate their most complex challenges as the investment landscape and the world change around them. By accelerating growth in iShares, illiquid alternatives and technology, keeping alpha at the heart of BlackRock and being a global leader in sustainable investing, BlackRock is uniquely positioned to provide whole portfolio solutions for clients. This is leading to deeper and more comprehensive relationships with more clients and we believe will enable us to continue to deliver on our 5% organic base fee growth target.

Advancing Sustainable Investing to Drive Better Outcomes for Investors

BlackRock’s commitment to sustainability is embedded across our business because our deeply held investment conviction is that integrating sustainability can help investors build more resilient portfolios and achieve better long-term, risk-adjusted returns. That is why we have made sustainability integral to the way we manage risk, generate alpha, build portfolios and pursue investment stewardship.

Earlier this year, I asked all companies BlackRock is invested in on behalf of our clients to disclose a plan for how their business model will be compatible with a net zero economy, because every company will be profoundly affected.

BlackRock’s net zero commitment centers on helping clients prepare their portfolios for a net zero world, and our ambition is to have net zero emissions across all our assets under management by 2050.

In line with this ambition, I’m proud that BlackRock announced recently that we joined the Net Zero Asset Managers Initiative.

We are committed to making our ambition a reality and we are evolving our business to embed the management of climate-related risks and opportunities across our strategy and operations. As we outlined in our 2021 sustainability commitments, we are: advocating for companies to transition their own business models; offering our clients more choice to reallocate their capital; helping clients realize the substantial investment opportunities that will come from the climate transition; and investing in better data, tools and technology to measure and assess the impact on portfolios of climate and other sustainability factors.

Guided by our Board of Directors

Much of BlackRock’s success can be attributed to our engaged Board of Directors who act as stewards on behalf of our shareholders in overseeing BlackRock’s management and operations, evaluating risk and opportunities for our business and challenging our management team. The Board regularly reviews the pillars that underpin BlackRock’s ability to generate long-term value and our directors have played an integral role in helping us navigate our business through the pandemic.

A key component of preparing the firm for the future is preparing the next generation of leaders. While I have no intention of leaving BlackRock anytime soon, I have worked diligently with the Board over the past decade on building a strong bench of talent that represents the breadth of our business. We continue to move our senior leaders into new roles that provide them with the diversity of experience, global perspective and One BlackRock mindset that will allow them to lead BlackRock to new heights long after Rob Kapito and I have moved on.

The diverse backgrounds of our individual directors also play a significant role in their ability to oversee our business from a variety of perspectives. We make diversity in gender, race, ethnicity, age, career experience and nationality, as well as diversity of mind, a priority when considering director candidates. We will continue to evolve our Board over time to reflect the breadth of our global business and to guide us as we move forward in an ever-changing environment.

Moving forward together: Our commitment to you

Each year, I have the privilege of writing to you about BlackRock’s outlook and plans for the future. And each year, I am more excited about the pace of change and size of opportunities that we are seeing.

Just as BlackRock is a fiduciary to our clients, helping them invest for the future, I recognize many of you are investing in BlackRock to achieve your own long-term goals and I want to thank you for your continued support.

By investing in and operating our business for the benefit of all stakeholders, BlackRock has been able to deliver durable, long-term profitability for you – our shareholders. we will continue leveraging our scale, globally diverse investment platform and capabilities in technology and portfolio construction to differentiate ourselves as we look ahead.

We will continue to live by our purpose so we can: help millions of people invest to build savings; make investing easier and more affordable; advance sustainable investing; and contribute to a more resilient economy.

And we will be guided by our culture and a set of newly enriched principles that reflect who we are today and in the future:

We are a fiduciary to our clients. Their interests come first.

We work collaboratively to create the best outcomes for our clients, our firm and the communities where we operate.

We are passionate about performance. We are relentless about finding better ways to serve clients and improve our firm.

We take emotional ownership. The people we serve entrust us to help them prepare for the future. Our culture is defined by the deep sense of responsibility we feel to our clients and to each other.

We are committed to a better future. We are long-term thinkers, focused on helping people build a better tomorrow. And we always strive to serve more people, and to find new and innovative ways to help them achieve financial well-being.
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