BlackRock is the new green?

BlackRock, the world’s largest asset manager ($7.43trn), announced that it would put climate change and sustainability at the heart of its strategy.

According to The Economist, last week Larry Fink, company founder and CEO of BlackRock, said in a letter sent to their clients and the bosses of companies in which they invest, that climate change is now a “defining factor” in business prospects that will also fundamentally reshape the finance industry.

BlackRock will demand greater disclosure from all companies on their carbon emissions and climate risks. It will double its offering of sustainable funds, targeting a $1trn within a decade. It will divest any investment that is heavily dependent on revenues coming from thermal coal electricity generation.

No tree-hugging for the cynics.  

Mr. Fink acknowledges that climate change is the biggest concern of its firm clients. Also, they are integrating climate analysis within the risk management tool they sell to other financial firms; hopefully responding to the fact that no financial model can be competitive without integrating sophisticated climate models in it.

On an earthlier level, they also will dump company directors who fail to act on climate change. Why? Through a recent analysis published by the Institute for Energy Economics and Financial Analysis (IEEFFA), it’s estimated that they lost over $90bn due poor investments in fossil fuel companies. Also, in the letter Mr. Fink writes “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.” And then continues to say, “Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk.”

BlackRock also joined the Climate Action 100+ initiative which pledges to reduce emissions, be more transparent and stronger governance. Basically, pressing big polluters to clean up. They are also looking to strengthen their analysis of environmental, social and governance (ESG) risks, having new tools to analyze the impact on climate.

No newcomer

In his 2018 letter entitled “A sense of purpose”, Mr. Fink said that firms should do more that create shareholder value, according to The Economist.  Hopefully this two-year journey from “A sense of Purpose” to “Defining factor” will soon translate into “Profitable Sustainability is the only way we do business”.