USA: BlackRock makes climate change central to investment strategy

BlackRock announced on 14 January 2020 that it would make climate change central to its investment considerations. Citing the impact climate change has on the financial sector, BlackRock released a letter to its clients detailing the changes which include: factoring ESG risk into its investment decisions, prioritising engagement with companies whose operations are in line with the UN SDGs, requiring greater transparency, and divesting from coal by mid 2020. Civil society, including enviornmental scientists and activists, celebrated the announcement but criticised that divesting from coal is not enough and that BlackRock could be harsher on companies whose operations are not in line with a carbon-neutral transition. 

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Article
17 January 2020

Activists cheer BlackRock's landmark climate move but call for vigilance

Author: Edward Helmore, The Guardian

"Activists cheer BlackRock's landmark climate move but call for vigilance", 15 January 2020

The decision by BlackRock... to exit investments that “present a high sustainability-related risk” has been welcomed by environmentalists as a significant moment in the battle to reshape the relationship between money and the climate crisis... [L]eading climate science writer Bill McKibben [said]... “The steps BlackRock is taking are baby steps... we will have to... push hard for them to begin striding at the pace we need to go.... [C]oal is part of the problem, but not the biggest part of the problem – oil and gas are... Fink made noises that natural gas is part of the solution but it’s not... at least we’ve reached the point that they’ve realized they have a role in dealing with the climate crisis.”... A report last year by the Washington DC-based Majority Action and the Climate Majority Project claimed that BlackRock had voted overwhelmingly against key climate resolutions at energy companies, including ExxonMobil... Majority Action’s Eli Kasargod-Staub [said]... “BlackRock has the power to [say] ‘Either you commit to the science-based targets of the Paris climate agreement and align your operations, governance, political spending, lobby and trade association activities to achieve that target or we will vote against you and your directors...ExxonMobil or Marathon petroleum... have actively undermined our ability to protect long-term investors and meet the goals of the Paris agreement’”. 

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Article
17 January 2020

BlackRock CEO letter calls for greater transparency and sustainability standards

Author: Larry Fink, CEO of BlackRock

"A Fundamental Reshaping of Finance", 14 January 2020

Climate change has become a defining factor in companies’ long-term prospects... [C]limate change is almost invariably the top issue that clients around the world raise with BlackRock.. [and] driving a profound reassessment of risk and asset values.... BlackRock announced a number of initiatives to place sustainability at the center of our investment approach, including: making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk... and strengthening our commitment to sustainability and transparency... Governments and the private sector must work together to pursue a transition that is both fair and just... [A] company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders... Companies and countries that champion transparency and demonstrate their responsiveness to stakeholders, by contrast, will attract investment more effectively, including higher-quality, more patient capital... This year, we are asking the companies that we invest in... to: (1) publish a disclosure in line with industry-specific [Sustainability Accounting Standards Board] guidelines... and (2) disclose climate-related risks in line with the [Task Force on Climate-related Financial Disclosures]’s  recommendations... [W]e will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.

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Article
17 January 2020

BlackRock client letter announces sustainability as new standard for investing strategy

Author: BlackRock's Global Executive Committee

"Sustainability as BlackRock's New Standard for Investing", 14 January 2020

...[I]nvestment risks presented by climate change [will]... have a profound impact on the pricing of risk and assets around the world... [S]ustainable investment options have the potential to offer clients better outcomes... we are making sustainability integral to the way BlackRock manages risk, constructs portfolios, designs products, and engages with companies. We believe that sustainability should be our new standard for investing... By the end of 2020, all active portfolios and advisory strategies will be fully ESG integrated – meaning that... BlackRock [willconsider] ESG risk with the same rigor that it analyzes traditional measures... [W]e are... removing from... companies that generate more than 25% of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020... BlackRock’s alternatives business will make no future direct investments in companies that generate more than 25% of their revenues from thermal coal production... [O]ur investment stewardship team is intensifying its focus and engagement with companies on sustainability-related risks [by] Joining Climate Action 100+... mapping our engagement priorities to specific UN Sustainable Development Goals, such as Gender Equality and Affordable and Clean Energy... [and] enhancing the transparency of our stewardship practices

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Article
17 January 2020

Citing climate change, BlackRock will start moving away from fossil fuels

Author: Bill McKibben, The New Yorker

 "Citing Climate Change, BlackRock Will Start Moving Away from Fossil Fuels", 16 January 2020

In the past few months, Goldman Sachs, Liberty Mutual, and the Hartford Financial Services Group, Inc., have all put forth new climate policies, and the European Investment Bank—the largest international public bank in the world—announced that it would stop lending to fossil-fuel projects altogether... BlackRock’s actual policy changes... [don't] directly address BlackRock’s main business, which is passive index funds. The company has previously maintained that it can’t do anything about the contents of those indexes... BlackRock’s announcement suggests that this position is changing... [BlackRock could] persuade Standard & Poor’s and other index makers to produce “sustainable” versions of their main products—at which point, if BlackRock began nudging its biggest customers into those investments, the shift of money would be far greater...  “I... see this as the beginning of the end for the fossil-fuel system,” Kingsmill Bond, an analyst who used to work at Citibank and Deutsche Bank, and is now with the London-based Carbon Tracker Initiative, told me. “Who, now, will want to hold the stranded assets of the fossil era?”

 

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Article
17 January 2020

Commentary: BlackRock's announcement does not do enough to mitigate the risks of climate change

Author: Diana Best, Ben Cushing, Moira Birss, and Cassey Harrell

"Our in-depth analysis of BlackRock's climate announcement", 14 January, 2020

BlackRock... announced a sweeping new set of policies which aim to put climate change and sustainability at the center of BlackRock’s business model... Massive capital shifts away from fossil fuels and deforestation-risk commodities are necessary to mitigate the worst of the climate crisis and set the world on a path toward sustainability. As the world’s largest asset manager, BlackRock must play a leading role in... ‘fundamentally reshaping finance to deal with climate change.’...Today’s announcement is not enough. BlackRock must implement additional shifts of capital out of fossil fuels... acknowledge and take action on the fact that its portfolios... are actively contributing to climate change and thus contribute [to] the risk that climate change poses to the global financial system. It must clearly define what it means by “sustainable” and improve its criteria around ESG to be Paris-compliant... [I]t must engage with companies in a concrete, transparent, time-bound way with consequences for inaction like voting against board members.

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