In his annual letter to shareholders, Larry Fink, the head of the world’s largest asset manager, said Russia’s invasion of Ukraine has severed cross-border economic and diplomatic ties, ending three decades of globalization already strained by the pandemic.

The era of peace and globalization “accelerated international trade, expanded global capital markets, increased economic growth,” wrote Fink, whose fund manages about US$10 trillion in assets. “But the Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades.” 

Fink’s address, which business leaders and investors closely read, lays out his predictions for the tumultuous market conditions that lay ahead and how to manage them—without neglecting environmental and social issues. Here are some of the highlights: 

Conflict as a catalyst for digital currencies: Fink said the war in Ukraine could accelerate digital currencies as a tool for international transactions. “Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate,” said Fink, invoking the U.S. central bank’s recent study of a potential digital dollar. The Bank of Canada is likewise exploring how it could use a digital currency. “A global digital-payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption,” he wrote. 

Hurdles in the energy transition: As western countries reduce their reliance on Russian oil and gas, “the energy sector will be meaningfully impacted,” said Fink, citing soaring gas prices. “Energy security has joined the energy transition as a top global priority,” he wrote. Without Russian oil, countries like the U.S. and Canada may produce more of it, while regions like Europe and Asia may increase their coal consumption. Fink said these are decisions that, in the short term, will slow the transition from fossil fuels to clean energy; in the long term, he said they could accelerate the shift to renewables.

More onshoring: Fink believes the crisis in Ukraine, coupled with ongoing supply-chain challenges linked to the pandemic, could trigger more domestic manufacturing. “This decoupling will inevitably create challenges for companies, including higher costs and margin pressures,” he said, adding that “a large-scale reorientation of supply chains will inherently be inflationary.”

The long-term view: BlackRock logged record financial results in 2021, delivering 20 per cent revenue growth. In his letter, Fink warned shareholders of weaker returns this year. “As a significant owner of BlackRock shares myself, I share your disappointment in our stock’s performance year-to-date,” he wrote. 

Some things never change: Despite the new world order Fink describes in his letter, he’s intent on salvaging some old world features. The CEO lamented the “cross-fertilization of ideas” missed by remote work, adding that the “energy and excitement” of BlackRock employees has been “palpable” since returning to the office. At the same time, Fink acknowledged the need for flexibility “to retain and attract best-in-class diverse talent.”