BlackRock’s Larry Fink warned that Russia’s invasion of Ukraine would reshape the world economy and further drive inflation by prompting companies to withdraw from their global supply chains.

“Russian invasion of Ukraine ended the globalization we’ve experienced over the past 30 years,” Fink wrote In his annual chairman’s letter to shareholders BlackRock is the world’s largest asset manager with $10 trillion in assets under management.

While the immediate result is that Russia is completely cut off from capital markets, Fink predicts that “companies and governments will also look more broadly at their reliance on other countries. This could lead to companies doing more operations onshore or nearshore, leading to Some countries pulled out faster.”

“Mass repositioning of supply chains is inherently inflationary,” Fink wrote in a 10-page letter, which also addressed the impact of the invasion on the energy transition and cryptocurrencies, updating investments Viewers’ views on BlackRock’s lines of business and the reopening of its main offices.

The letter did not mention any specific countries that would be affected by the shift, but Fink wrote that “manufacturing hubs in Mexico, Brazil, the United States or Southeast Asia could benefit.” Other investors see the last group as an alternative to China, where BlackRock launched a suite of retail investment products last year.

Fink advocates for BlackRock-backed companies to do more to combat climate change. His letter predicts that the Russian invasion will affect the transition to clean energy.

Initially, finding alternatives to Russian oil and gas “will inevitably slow the world’s progress towards net-zero emissions” [emissions] in the short term,” he wrote.

“In the long run, I believe recent events will actually accelerate the transition to greener energy,” he wrote, as higher fossil fuel prices will make the wider range of renewables financially competitive.

While climate activists want investors to steer clear of fossil fuels altogether, Fink has rejected that approach, as he did in his his January letter to the CEO. “BlackRock remains committed to helping clients navigate the energy transition. This includes continuing to work with hydrocarbon companies,” he wrote. “To ensure continuity of affordable energy prices during the transition, fossil fuels such as natural gas will be important as transition fuels.”

In his first comments on cryptocurrencies, Fink drew attention to the “potential impact of the Ukraine war on accelerating digital currencies.” . . A well-designed global digital payment system can enhance the settlement of international transactions while reducing the risk of money laundering and corruption. “

He told investors that BlackRock is working on digital currencies and the underlying technology due to increased client interest.

Fink expressed sympathy for his shareholders as BlackRock shares fell nearly 20% as financial markets got off to a bad start this year. “I’m as disappointed as you are with our stock’s year-to-date performance. But we’ve faced challenging markets before. And we’ve always managed to be better and more prepared on the other side,” he wrote.

He also noted that the company will emerge from “the strongest organic growth in its history” in 2021, when active markets and rising interest in alternative assets and exchange-traded funds brought in $540 billion in net inflows.

Going forward, Fink made it clear that BlackRock wants employees to return to the office, but it won’t be one of those employers who insist on a full return to pre-pandemic norms. “Working together, collaborating and personally developing our people is critical to BlackRock’s future,” he wrote. “There are conversations that cannot be replicated on a video call . . . we lose the space, creativity and emotional connection that comes with being together face to face.”

“At the same time, we recognize that the pandemic has redefined the relationship between employer and employee. To retain and attract top-notch diverse talent, we need to maintain the flexibility to work from home at least part of the time,” he said.