BlackRock’s new climate strategy

BlackRock, the world’s largest asset manager, vowed on Tuesday to make climate change a pillar of its corporate strategy and mission.

Why it matters: BlackRock has nearly $7 trillion in assets under management, and faces growing activist pressure to use its leverage to hasten the global transition to low-carbon energy.

The NYT’s Andrew Ross Sorkin writes that the move «could reshape how corporate America does business and put pressure on other large money managers to follow suit.»

Driving the news: CEO Larry Fink, in his annual open letter, writes that climate is a «defining factor in companies’ long-term prospects» and that «we are on the edge of a fundamental reshaping of finance.»

The company announced a suite of new steps on climate and weaving sustainability into its investment products, including…

  • Offering «sustainable versions of our flagship model portfolios.»They will «use environmental, social, and governance (ESG)-optimized index exposures in place of traditional market-cap-weighted index exposures.»
  • Doubling the number of ESG-focused exchange-traded fundsit offers over the next few years and new tools to help clients screen out fossil fuels.
  • Dropping companies that produce coalused in power production from its active investment portfolios. It applies to companies that derive more than a quarter of their revenue from thermal coal production.
  • More broadly, BlackRock is vowing more «sustainability integration»into its active investment portfolios.
  • A tougher posture on climate-related shareholder resolutions.«[W]e will be increasingly disposed to vote against management when companies have not made sufficient progress,» it said. The company has faced criticism for voting against key shareholder resolutions that push companies to take stronger steps.

The moves come days after BlackRock joined the investor advocacy network Climate Action 100+.

The intrigue: The letter hints at why BlackRock will face continued criticism from activists who want more aggressive movement away from fossil fuels.

  • «Despite recent rapid advances, the technology does not yet exist to cost-effectively replace many of today’s essential uses of hydrocarbons,» Fink tells CEOs.
  • «We need to be mindful of the economic, scientific, social and political realities of the energy transition,» he adds.

Bonus: What they’re saying about BlackRock

This morning I touched base with the Sunrise Project, which pushes financial firms to pull money away from coal, oil and gas.

Here’s part of a statement from Sunrise senior strategist Diana Best…

  • “BlackRock beginning its shift of capital out of fossil fuels, including today’s divestment of coal in its actively managed funds, is a fantastic start and instantly raises the bar for competitors such as Vanguard and State Street Global Advisors,» said Best.

But, but, but: She notes BlackRock will «still remain one of, if not the largest, investors in fossil fuels.»

«So we will be looking for additional leadership from the company in, as Larry Fink said, ‘fundamentally reshaping finance to deal with climate change,” including additional shifts of capital out of fossil fuels,» said Best, whose group is part of the wider BlackRock’s Big Problem campaign.


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