Larry Fink is telling companies to prepare for a zero-emission world. The CEO of BlackRock, the world’s largest asset manager, told the CEOs of their portfolio companies to outline their plans to achieve net zero carbon emissions by 2050 and show that their board of directors has revised the plans.
“There is no company whose business model is not profoundly affected by the transition to a zero net economy – one that does not emit more carbon dioxide than it removes from the atmosphere by 2050, the limit scientifically established necessary to keep global warming well below 2ºC, “wrote Fink in his annual letter to CEOs on Tuesday.
BlackRock last year caused a sensation when it said it would place environmental sustainability at the center of its investment strategy, including divesting fossil fuel producers. Blackrock’s move, with a portfolio of more than $ 7 trillion, effectively puts pressure on other financial companies to increase their own climate commitments, according to environmental advocates.
“The signal is becoming undeniable to the board that conventional finance really regards climate risk as a financial risk, and it is your business to create and disclose reliable transition plans,” said Ben Ratner, senior director at EDF + Business, a partnership between the Defense Fund Environmental Agency and companies that promise to decarbonize.
Hundreds of companies and dozens of nations have pledged to zero their carbon emissions by the middle of the century. Few, if any, have achieved this goal. Alphabet’s Google unit, for example, announced in September that it eliminated all of its contribution to climate change through carbon offsets – a technique in which companies pay for carbon reduction projects, such as planting trees or catching leaks to help combat the greenhouse gases that they emit.
Ratner said BlackRock’s request for specific plans could prompt companies to reveal details they have so far avoided disclosing.
“Even though there was a positive wave of net promises of zero … in many cases, the details are still not there in the plans to achieve this,” he said.
It is difficult for laypeople to distinguish between a company that is actually reducing its emissions and one that simply has good marketing, Ratner added. “O [sustainable] the investment scenario today is a little wild, “he said.
BlackRock itself has been called: the company still has $ 85 billion in coal production shares, thanks to a gap in its climate promise, the Guardian recently reported. She was also accused of fomenting deforestation in the Amazon through her investments in companies that conduct business in Brazil’s most threatened natural resource.
Meanwhile, activists have embraced divestment as a way to prevent environmentally destructive projects, with 350.org founder Bill McKibben writing that “money is the oxygen in which the fire of global warming burns”. Universities and public pension funds have followed suit, with two New York City public pension funds moving this week to abandon fossil fuel investments.
No less powerful than the Federal Reserve recognized the dangers of climate change, last year designating it as a systemic risk and joining a network of global regulators dedicated to policy research and response.
Continuing the fall
US carbon emissions fell by an unprecedented 10% last year, the biggest drop since World War II, reflecting a highly unusual spring, when industry and traffic were paralyzed under domestic orders. Deferring the worst effects of climate change, which has contributed to hundreds of thousands of deaths and caused billions of dollars in damage, would require cutting emissions by approximately that dramatic amount each year by 2050 – avoiding the negative economic and social impacts of blockages.
For Fink of BlackRock, the response to the coronavirus pandemic creates a possible model for climate action.
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,” Fink wrote. “It reminded us how the biggest crises, whether medical or environmental, require a global and ambitious response.”
In other words: decisive action by governments is needed. Many nations, especially in Europe, have pledged to meet the challenge by linking economic recovery funds to environmental measures, while activists in the US are pushing the newly opened Biden government will act aggressively on the climate.
“It is a fantasy to think that even Wall Street can help create decarbonization on its own,” said Ratner. “Climate change is such a problem that it requires governments, businesses and communities to row together.”