BlackRock, the $7 trillion-plus gorilla in the asset management space, is joining the climate change fight.
Having already signed onto Climate Action 100+, which is an investor initiative “to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change,” Chairman Larry Fink told America’s corporate executives in his annual letter that the issue will completely disrupt global finance going forward.
“Climate change has become a defining factor in companies’ long-term prospects,” Fink wrote. “Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect. But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.” [Emphasis his]
New ‘sustainability’ initiatives
BlackRock will, therefore, place a number of initiatives front and center in its investment approach, including:
- Making sustainability integral to portfolio construction and risk management;
- Exiting investments that present a high sustainability-related risk, such as thermal coal producers;
- Launching new investment products that screen fossil fuels; and
- strengthening “our commitment to sustainability and transparency in our investment stewardship activities.”
“In the discussions, BlackRock has with clients around the world, more and more of them are looking to reallocate their capital into sustainable strategies,” Fink added. “If 10% of global investors do so—or even 5%—we will witness massive capital shifts. And this dynamic will accelerate as the next generation takes the helm of government and business.”
Referencing recent protests against BlackRock specifically for its large fossil fuel allocation, Fink concluded that, “Young people have been at the forefront of calling on institutions—including BlackRock—to address the new challenges associated with climate change. They are asking more of companies and of governments, in both transparency and in action.”