BlackRock, the world’s largest investment fund manager, has threatened to sell shares in the worst polluting companies in an attempt to support the goal of net zero carbon dioxide emissions by 2050.
Larry Fink, BlackRock’s chief executive, said the investor would ask companies whose shares he holds to disclose their plans to achieve zero net emissions. The new approach is defined in Fink’s annual letter to CEOs around the world. BlackRock could then dispose of polluting companies in its actively managed funds – which account for about a tenth of its assets – if they did not improve.
BlackRock has significant influence with companies, investors and governments because of the wide range of stocks, bonds and other assets it controls, worth $ 8.7 trillion (£ 6.4 trillion) at the end of December. Its size makes it a major player in sustainable investments, although only US $ 616 billion of its assets, about 7%, are managed with environmental, social or governance criteria taken into account.
Fink said the coronavirus pandemic has increased focus on the climate crisis among investors.
“I believe that the pandemic presented such an existential crisis – such a stark reminder of our fragility – that it led us to face the global threat of climate change more strongly and to consider how, like the pandemic, it will change our lives,” I wrote.
“No problem ranks above climate change on our customers’ priority lists.”
BlackRock has faced significant pressure from environmental activists to improve its track record of climate action, given its role as the largest stock and bond controller in the world, including vast holdings of fossil fuel companies.
The promise to support net zero by 2050 puts BlackRock in line with the commitments of more than 100 countries around the world, and with some of its big rivals who have already promised not to invest in companies that pollute until 2050.
Other investors went further. New York City announced on Monday that two of its pension funds for employees and teachers voted in favor of divesting $ 4 billion in fossil fuel companies.
“Fossil fuels are not only bad for our planet and our frontline communities, they are a bad investment,” said New York Mayor Bill de Blasio.
Part of BlackRock’s promise will mean playing a more vigorous role in its dealings with the companies whose shares it holds, including a greater willingness to vote against the councils and in favor of climate resolutions and the “potential exit” of companies that are not trying to improve. It will focus its efforts on 1,000 companies – 440 out of 2020 – that together account for 90% of the emissions in BlackRock’s portfolio.
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The asset manager last year pledged to divest from companies that obtained more than 25% of its thermal coal revenues, but the latest decision to threaten further divestments represents a stronger signal, especially for oil and gas extractors who do not have a plan zero net emissions.
However, the company will maintain vast stakes in fossil fuel companies due to its role in providing funds that passively monitor investment ratios, about 90% of its stakes. Even after the promise of thermal coal, BlackRock has assets worth $ 85 billion in coal-producing companies.
Environmental activists welcomed BlackRock’s decision to consider divesting the worst climate stragglers. However, Gaurav Madan, a senior activist at Friends of the Earth, said his actions, including the promise of net zero, were “too little, too late”.
“This does not reach the visionary leadership that we need the world’s largest investor in coal, oil and gas and commodities linked to deforestation,” he said.
BlackRock says it is not its role to force its customers to dispose of fossil fuel producers, but argues that it is making it easier for customers like pension funds and university donations to choose environmentally friendly investments instead of supporting polluters. This included new measures that show “temperature alignment” scores for equity and bond funds, adding even more climate risks to their investment processes and launching new funds in line with the net zero target.