Asset management giant promises to put environmental issues at the heart of its investment strategy, following pressure from climate protestersLatest: Extinction Rebellion says BlackRock’s not doing enoughBREAKING: BlackRock pledges to fight on climate issuesFink: We’ll quit (some) thermal coal producersBlackRock’s new planBlackRock threatens to vote out bosses who neglect sustainability 4.19pm GMTFinally, here’s Associated Press’s take on the BlackRock move:BlackRock, the world’s largest asset manager, will make climate change central to its investment decisions.Founder and CEO Laurence Fink, who oversees the management of about $7 trillion in funds, said in his influential annual letter to CEOs Tuesday that he believes we are on the edge of a fundamental reshaping of finance because of a warming planet. 3.01pm GMTIf BlackRock really wants to make a difference on the climate emergency, it needs to pile more pressure onto the companies it invests in.That means voting in favour of climate-friendly motions at AGMs, and voting against directors who don’t take the problem seriously enough.Fink’s most eye-catching shift is to change how BlackRock plans to engage with the companies it invests in, whether active or passive. From now on, it will be “increasingly disposed” to vote against directors at companies that are not doing enough. That includes those like Exxon Mobil which lobbyist CDP argues have been slow to explain how their balance sheets would be affected by higher temperatures.BlackRock itself is evidence of what such a change can achieve. Fink’s greater focus on climate change owes much to the firm’s own clients – such as Japan’s huge Government Pension Investment Fund – shoving it in this direction. If Fink is serious about applying the same pressure on the companies BlackRock invests in, his 2020 letter may be seen as a watershed.Breakingviews – Larry Fink slowly becomes part of climate solution https://t.co/J7Z729rj3U 2.03pm GMTWhile environmental campaigners want more from BlackRock, investors such as Ross Gerber are applauding Larry Fink:Larry Fink is a visionary leader and we’re proud of the stance @blackrock is taking on #ClimateChange – we have substantial assets with them. This is one reason why. 1.59pm GMTHere’s our news story on BlackRock’s move into sustainable investing:BlackRock says climate crisis will now guide its investments https://t.co/zP0irH4nAR 1.46pm GMTHere’s Thomas O’Neill, research director at data analysts InfluenceMap (who helped with our Polluters investigation recently) on BlackRock’s decision to shun thermal coal producers:“This is a positive announcement in the move to make financing of thermal coal more costly.The climate movement will be watching closely to see how BlackRock’s policy of scrutinizing other parts of the thermal coal value chain develops – critically, concerning utilities who continue to plan on new coal generation.” 1.23pm GMTFinancial journalist Anne Ashworth reckons BlackRock has been bounced into action by the Greta effect:Stat of the day @blackrock (world’s largest money manager) to double the number of its sustainability-focused funds to 150. Group had been accused of not using its power to combat #ClimateChangeBlackRock boss acknowledges the impact of #ClimateChange demonstrations last year and expects “significant reallocation of capital.” Who would have thought that #GretaThunberg would have had an influence even on ISAs? 1.06pm GMTBlackRock certainly has a lot of catching up to do.As well as holding huge stakes in the fossil fuel industry, BlackRock has also dragged its feet on sustainability in the past, before now seemingly seeing the light.BlackRock itself has come under criticism from both industry and environmental groups for being behind on pushing these issues. Just 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.”According to Ceres and FundVotes, a unit of Morningstar, BlackRock had among the worst voting records on climate issues.” https://t.co/Zfrhp4VM2k 12.23pm GMTExtinction Rebellion aren’t very impressed by BlackRock’s move.The activist campaign, whose protests have helped highlight the climate emergency, points out that Larry Fink’s group has endless billions invested in polluting companies.It’s not always the case that something is better than nothing, particularly if it’s used to distract from the truth. And the truth is that the world’s biggest miners and polluters will not be losing any sleep over this.BlackRock remains waist-deep in fossil fuel investments and the world’s top backer of companies that destroy the Amazon rainforest and ignore the rights of indigenous people. BlackRock can rest assured that we will continue to pile on the pressure until they act to protect our children and the natural world.BlackRock and Vanguard opposed or abstained on more than 80% of climate-related motions at FTSE 100 and S&P 500 fossil fuel companies between 2015 and 2019, according to data provided by ProxyInsight.The big three are among a number of asset managers that offer “climate-friendly” and “sustainable” investment funds that have substantial holdings in fossil fuel companies. 12.14pm GMTAuthor and journalist Andrew Ross Sorkin says Larry Fink’s move towards sustainable investment is a “watershed” moment:”The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.” More highlights from Larry Fink’s annual letter — which will likely be a watershed in the world of business belowhttps://t.co/DeVMMlQvVvBlackRock Inc., the world’s biggest fund manager with $7 trillion of assets, says it plans to “place sustainability at the center of our investment approach.” As environmental, social and governance issues become more pressing, especially for younger savers, it’s a savvy business move that will pressure its peers to follow suit.But there’s a problem. With about two-thirds of the money it manages allocated to index-tracking funds, the issue of how to harness the resources in passive products — the bulk of which command fees that are too low to finance costly and time-consuming engagement with company boards — remains unaddressed. 11.40am GMTBloomberg’s David Fickling has a good theory about BlackRock’s move towards climate activism.He reckons some CEOs are as scared about the climate emergency as anyone, but can’t reconcile it with their daily lives. This means they end up taking business decisions that make the crisis worse. Related: Adani coalmine: Siemens CEO has ‘empathy’ for environment but refuses to quit contract But the letter itself keeps nagging at me. I think while it’s right to take a cynical view of mere words — Siemens is still going ahead with the contract, after all — it’s worth listening to the … *anguish*, really, that comes across in the letter.From the outside it looks like political and corporate decision-making is the outcome of an ironclad process. The way these institutions frame their decisions seems calculated to give them a feeling of reasoned inevitability.I don’t think that’s how it really works.I think things like a CEO having a crisis of conscience actually matters. More CEOs should be having such crises! And then giving serious thought to what they can do to change outcomes. If they don’t have the crisis, they probably won’t make the change.Since the Paris Agreement we’ve seen a real shift in corporate thinking on these issues.I’m very sceptical of Blackrock’s latest announcement on climate, but it’s hard to imagine anything of this sort happening five years ago: https://t.co/JKbUZlnNnL 11.28am GMTBlackRock’s move has been welcomed by the US senator for Hawaii, Brian Schatz:This is enormously important and great news. https://t.co/19Vnm6L2Q1 11.19am GMTNot everyone understands the importance of the climate emergency, of course.If you want to keep putting money into fossil fuel producers, or other companies who contribute large CO2 emissions, BlackRock will happily invest it for you.We invest on your behalf, not our own, and the investments we make will always represent your preferences, timelines, and objectives. We recognize that many clients will continue to prefer traditional strategies, particularly in market-cap weighted indexes. We will manage this money consistent with your preferences, as we always have. The choice remains with you.As we move to a low-carbon world, investment exposure to the global economy will mean exposure to hydrocarbons for some time. While the low-carbon transition is well underway, the technological and economic realities mean that the transition will take decades. Global economic development, particularly in emerging markets, will continue to rely on hydrocarbons for a number of years. As a result, the portfolios we manage will continue to hold exposures to the hydrocarbon economy as the transition advances. 10.56am GMTBlackRock’s decision to drop major thermal coal producers like hot potatoes is a blow to the fossil fuel sector, says Jeanne Martin, campaign manager at ShareAction, the responsible investment campaign group.But, she insists Larry Fink and colleagues need to do a lot more to actually clean up the financial sector, and put pressure on banks:“BlackRock’s coal divestment decision is yet another significant blow to the already dying market. Yet major banks like Barclays continue to prop up coal-heavy companies. If BlackRock is serious about its commitment to phase out thermal coal, it should use its voting rights to get major coal financiers to do the same.While we welcome its commitment to improve transparency of its stewardship activities, for far too long the asset manager has kept everyone in the dark about the companies it was meeting with, the topics discussed, and most importantly the outcome of those engagements.But we might not like what we see when we open the door on these activities: BlackRock’s current voting disclosures on climate issues give little comfort that it will vote in a manner fitting of the climate crisis.” 10.47am GMTBlackRock’s pledge to become a more environmentally responsible investor has been welcomed by some campaigners.Diana Best, senior strategist for the Sunrise Project, says Larry Fink’s decision is a “fantastic start”, which could spur rivals into action.“BlackRock’s new initiatives match the size of the crisis we’re seeing 2020 and are the direct result of an outpouring of pressure from the global climate movement that has zeroed in on the company over the past year. Putting climate change at the absolute center of its business is the way every company should respond to this planetary emergency. “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. Even with today’s announcements, based on its size 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.” 10.38am GMTBlackRock is also promising to double the number of environmental, Social, and Governance-focused exchange-traded funds it offers.It will add a ‘fossil fuel screen’ to allow investors to keep their money away from big polluters.Given the groundwork we have already laid and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management when companies have not made sufficient progress. 10.25am GMTYou can read Larry Fink’s annual letter to the world’s CEOs, warning about the climate emergency, here: A Fundamental Reshaping of FinanceBlackRock’s letter to clients, outlining its new pledge to sustainable investment, is here: Sustainability as BlackRock’s New Standard for Investing 10.23am GMTHow, exactly, will BlackRock clean up its act? The investment giant has told clients this morning that it will make several major changes. Some will improve its own practices, and others will make it easier for people to choose environmentally-sustainable products. 10.11am GMTSome journalists are questioning quite how significant BlackRock’s new environmental pledges will be in practice.Neil Hume of the Financial Times reckons the new anti-coal policy won’t affect the world’s biggest miners. That’s because their coal production, although significant, is only a small part of their overall business.So its seems Blackrock are going to divest companies that derive 25 per cent of their revenue NOT profits from thermal coal. So that means Glencore and every other diversified miner will be OK. pic.twitter.com/J6HyYAxZsTDifficult to tell the extent Blackrock will actively pursue this. They’re stuck when it comes to divesting in companies in their passive funds, but they certainly have more room to pressure companies to adopt more sustainable practices https://t.co/XPqC8wzygP 9.54am GMTBlackRock’s new opposition to thermal coal, and the firms which burn it, could make it harder to invest in China.China produced 44% of the world’s coal in 2016, according to data from the World Economic Forum. 9.47am GMTBlackRock is promising to ditch its holdings in any company that produces more than a quarter of its revenues from thermal coal.Thermal coal is significantly carbon intensive, becoming less and less economically viable, and highly exposed to regulation because of its environmental impacts. With the acceleration of the global energy transition, we do not believe that the long-term economic or investment rationale justifies continued investment in this sector.As a result, we are in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25% of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020. 9.34am GMTBlackRock has been targeted by climate emergency activists in recent months, given it is a major investor in the fossil fuel industry.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. And as trillions of dollars shift to millennials over the next few decades, as they become CEOs and CIOs, as they become the policymakers and heads of state, they will further reshape the world’s approach to sustainability. 9.20am GMTBlackRock is also firing a warning shot at business leaders, saying it will use its clout to vote them off their boards if they don’t take climate change seriously.CEO Larry Fink writes:We believe that when a company is not effectively addressing a material issue, its directors should be held accountable. Last year BlackRock voted against or withheld votes from 4,800 directors at 2,700 different companies. Where we feel companies and boards are not producing effective sustainability disclosures or implementing frameworks for managing these issues, we will hold board members accountable.Given the groundwork we have already laid engaging on disclosure, and the growing investment risks surrounding sustainability, we 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. 9.10am GMTInvestors around the world have woken up to the climate emergency, BlackRock says.In today’s letter, Larry Fink warns that capital will be reallocated faster than many people think — that’s a coded way of saying that certain assets prices are going to tumble.Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk. Indeed, climate change is almost invariably the top issue that clients around the world raise with BlackRock. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios. They are seeking to understand both the physical risks associated with climate change as well as the ways that climate policy will impact prices, costs, and demand across the entire economy.These questions are driving a profound reassessment of risk and asset values. And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future – and sooner than most anticipate – there will be a significant reallocation of capital. 9.01am GMTBreaking: BlackRock, the asset management titan, has announced it will put environmental sustainability at the core of its investment decisions.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.BlackRock does not see itself as a passive observer in the low-carbon transition. We believe we have a significant responsibility – as a provider of index funds, as a fiduciary, and as a member of society – to play a constructive role in the transition. 8.46am GMTHere’s our latest story on the push to safe Flybe. Related: Flybe: government considers air passenger duty cut to save airline 8.45am GMTIn the City, shares in UK gambling firms have fallen after they were hit with a ban on credit card payments.The Gambling Commission has decided to block people from placing bets using credit cards, responding to concerns that vulnerable gamblers are being allowed to run up huge debts.“There is clear evidence of harm from consumers betting with money they do not have, so it is absolutely right that we act decisively to protect them.Breaking: The Gambling Commission has this morning confirmed our story on the ban on credit card betting plus implementation of GamStop self-exclusion scheme.https://t.co/DJ3fftK2FG 8.37am GMTChina has also posted strong trade figures today, Exports rose 7.6% year-on-year in dollar terms in December, up from a 1.3% decline in November. That’s stronger than expected. 8.17am GMTChina’s currency has hit its highest level since the end of July.The yuan jumped by 0.3% to 6.8968 against the US dollar, on relief that relations with Washington are improving.The Chinese yuan is making gains and trading bullish against the US dollar early on Tuesday after the US Treasury Department announced its decision to stop calling China a currency manipulator. $USDCNH trading around.. https://t.co/2hi7wAls0t#forex #USChina #tradedeal #phaseone pic.twitter.com/cKu2jYxG1n 8.11am GMTChina has welcomed America’s decision to stop labelling it as a currency manipulator.Customs vice-minister Zou Zhiwu told reporters in Beijing that it was a “correct choice” (China had always insisted that the US was being unfair on this issue). 7.50am GMTGood morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.“China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountabilityThe symbolic removal of the ‘currency manipulator’ tag from China has no great significance but it’s a reward for getting the ‘Phase 1’ trade deal over the line and markets are euphoric ahead of tomorrow’s signing ceremony. The yuan is stronger, and is dragging trade -sensitive currencies with it. Related: Flybe on the brink as government urged to step in Continue reading… … Read More
- Post published:Jan. 17 2020
- Post category:Climate Change Brief
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I am a Content Manager for Climate Change Aware, selecting and approving new articles, contributors and downloads and running fact-checks on new content. Before joining CCA, I was an environmental engineer.