The CEO of the World’s largest investment manager has warned company directors they need to improve their approach to climate change.  Larry Fink of Blackrock said his firm was firmly of the opinion that sustainable investing would increasingly become an underpin to investment portfolios going forward.  The stark reality is that as investors move to protect their returns, they’ll reallocate capital accordingly and more likely towards businesses actively enhancing their sustainability  credentials.  Companies that don’t make the effort to address climate concerns, may find themselves locked-out of future investment capital rounds.

He said that Blackrock would divest from holdings that were high-risk as regards climate change describing what he called a “fundamental reshaping of finance”.  As public recognition grows of the need to address climate change, more investors globally are signalling their willingness to pressure firms who don’t take action to modify their stance on the carbon problem.

“Every government, company and shareholder must confront climate change”, Mr Fink said in his January 2020 annual letter to CEOs.  Transparency in its stewardship activities is also in his sights as Blackrock ramps up the pressure on achieving greater levels of sustainability-related disclosure from management teams.

Following this announcement, the asset manager announced it had disposed of $500m in equities from companies that generate more than 25% of their revenue from thermal coal. (As an aside, whatever Blackrock’s exit from these holdings means for their shareholders and their ESG stance, someone has to have acquired those shares so nothing has really changed except another firm is now backing these fossil fuel businesses.)

Climate change activist groups have previously criticised Blackrock and other large financials for their reliance upon fossil-fuel-related holdings and, whilst tepidly welcoming Blackrock’s actions, have said they’ll closely monitor how that evidences itself. Making clear their stance, Extinction Rebellion (XR) has emphasised their view that while any move in the right direction is to be welcomed, it falls short of their target of zero use of climate-change-inducing fossil fuels.


Blackrock encouraging sustainable investments due to rising fossil fuel use

Source: BP Statistical Review of World Energy

Quite how that can be achieved without causing catastrophic damage to the Global Economy, remains a Great Unknown however, so much more to-ing and fro-ing will undoubtedly ensue over this thorny question which leaves no nation untouched.

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