Blackrock embraces sustainability

Laurence D Fink, CEO of Blackrock - the world's largest asset manager with almost $7 trillion invested - announced that the company will divest from investments that 'present a high sustainability-related risk'.

In his 2020 annual letter to CEO‘s, Fink stated…

Climate change has become a defining factor in companies’ long-term prospects. 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.

The evidence on climate risk is compelling investors to reassess core assumptions about modern finance. Research from a wide range of organizations – including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others, including new studies from McKinsey on the socioeconomic implications of physical climate risk – is deepening our understanding of how climate risk will impact both our physical world and the global system that finances economic growth.

The European Investment Bank (EIB) announced their divestment from fossil fuels in November 2019 and it’s crucial for influential US institutions to take the lead in funding sustainability, especially when the US government outwardly rejects the climate emergency,

In the New York Times, Andrew Ross Sorking underlines the importance of Blackrock kickstarting the US finance industry into adopting sustainability, in the hope that other financiers will follow suit…

In recent years, many companies and investors have committed to focusing on the environmental impact of business, but none of the largest investors in the country have been willing to make it a central component of their investment strategy.

In that context, Mr. Fink’s move is a watershed — one that could spur a national conversation among financiers and policymakers.

It’s an important turnaround for Blackrock, recently accused of ‘greenwashing’. Sorkin writes…

…last month, a British hedge fund manager, Christopher Hohn, said that it was “appalling” of BlackRock not to require companies to disclose their sustainability efforts, and that the firm’s previous efforts had been “full of greenwash.”

Climate activists staged several protests outside BlackRock’s offices last year, and Mr. Fink himself has received letters from members of Congress urging more action on climate-related investing. According to Ceres and FundVotes, a unit of Morningstar, BlackRock had among the worst voting records on climate issues.

In A Word About Wind, Richard Heap notes that despite a muted reception from underwhelmed activists, it remains a victory, however ‘far from perfect’…

Fink’s intervention will reach many investors that climate protests would not, who may have been unconvinced about the need to act, or would question the wisdom about making changes in their own portfolios. Fink is highlighting questions about the climate and finance that need to be asked.

These are all good moves that build on BlackRock’s strength in renewables. It has identified as a $9trn climate infrastructure investment opportunity over the next 30 years, and is planning to invest $2bn-$3bn in renewables assets in 2020 and 2021. It currently manages $5bn of renewables assets globally.

Image – Wilson Center, CC BY-SA 3.0

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