Wednesday, January 15, 2020

BlackRock's Fink warns on climate change


THE GREENING OF A HEDGE FUND GREEN CAPITALISM





'Watershed moment': BlackRock pledges tough stance on climate

After activists ramp up pressure, world's biggest investment manager moves to reallocate capital away from fossil fuels.

by Ben Piven
 

'We believe that sustainable investing is the strongest foundation for client portfolios going forward,' says Larry Fink, chief executive officer of BlackRock Inc [Alex Kraus/Bloomberg]

BlackRock Chief Executive Larry Fink has demanded that corporate boards enhance efforts to address the climate crisis, marking a major transition for the globe's largest investment manager.

In his annual letter to CEOs posted on the BlackRock website on Tuesday, Fink describes a "fundamental reshaping of finance" - following years of pressure by activists unhappy about the company's role in bankrolling fossil fuels.

Fink said firms in the United States and beyond should act now or face the wrath of investors angry about how unsustainable business practices could take a bite out of their wealth. He wrote that BlackRock would "be increasingly disposed" to cast critical proxy votes tied to sustainability.

Eli Kasargod-Staub, executive director of the corporate governance watchdog group Majority Action, called the statement a "watershed moment" and said "advocates have for years been calling on BlackRock to improve its transparency on proxy voting".

Collectively with fellow asset managers State Street Corporation and the Vanguard Group, BlackRock holds about 25 percent of shares across the S&P 500, giving these firms the ability to set rules by how they vote.

"Leading investors realise the risks of climate change are being exacerbated by high-emitting companies, through their own capital expenditures, operations and policy," Kasargod-Staub told Al Jazeera.

Calling for corporations to "set targets aligned with the Paris Agreement", Kasargod-Staub said "net-zero carbon emissions" should be embraced through "trade associations, lobbying and political contributions".

"BlackRock needs to draw a clear, bright line for portfolio companies," he added, referring to the energy, electricity and transportation sectors.
'Beginning to crack'

Fink said in a separate letter to clients that the New York-based firm will sell off from its actively managed client portfolios all stakes in companies that derive more than 25 percent of their revenue from thermal coal production, achieving this goal by the summer of 2020.

BlackRock did not give specific details on which companies it would be divesting, or the size of those positions. At BlackRock and other investment firms, asset managers have clients with a wide range of political views and are careful to represent their actions in terms of investment strategy rather than politics.

Climate activists are praising Fink's stronger stances, though some say the asset manager will need to back up the new rhetoric.

Protesters eat fake money outside the BlackRock office during an Extinction Rebellion demonstration in London [Henry Nicholls/Reuters]

"BlackRock is beginning to crack, that's an enormous deal," said Pete Sikora, climate and inequality campaigns director at New York Communities for Change.

"They control about $7 trillion in assets - eight to 11 percent of every Fortune 500 company," Sikora told Al Jazeera. "[They are] the single biggest owner of basically every financial asset out there, and that includes fossil fuels."

He hailed BlackRock's shift toward holding every board of directors accountable on climate, but also said the company still should "rearrange their passive indexes so that the defaults exclude oil, gas and coal".

Sikora said Fink's gesture "did not come out of thin air" but was the result of "smart, relentless activism".

"Right now Australia is on fire, there's enormous flooding in Indonesia, and last weekend it was 68 degrees [20 degrees Celsius] in New York," he added. "BlackRock is part of what is torching the world."
'Looking at this very closely'

Top index fund managers rarely challenge company management and generally oppose climate resolutions.

At ExxonMobil's annual meeting on May 29, BlackRock backed all but one of 10 directors up for election - but opposed six of seven shareholder proposals.

Historically, BlackRock has said it engages executives behind the scenes, an approach that critics say does not really move the needle.

Banks also have faced pressure to trim fossil-fuel financing, and activists are challenging insurance companies not to cover projects in sectors with stranded asset risk.

Protesters gather outside the ExxonMobil annual shareholder meeting last year to protest the company's climate policies [Jennifer Hiller/Reuters]

Meanwhile, investors have started to put more money into more climate-friendly funds. Investments in sustainable exchange-traded funds grew to $20bn in 2019, nearly four times the previous year's record.

Ben Cushing, a campaign representative at Sierra Club, told Al Jazeera that BlackRock also should address deforestation, "which behind fossil fuels is the second-leading driver of the climate crisis".

He said that "Larry Fink's highly anticipated annual letter in 2019 failed to even mention climate change".

"[BlackRock] peers and competitors are going to be looking at this very closely" in 2020, Cushing added.

"At annual shareholder meetings this spring," said Cushing, "BlackRock has a near-term opportunity to implement these words and put them into action."

SOURCE: AL JAZEERA AND NEWS AGENCIES




BlackRock, world's largest asset manager, changing its focus to climate change

'In the near future … there will be a significant reallocation of capital,' CEO says










BlackRock Chairman and CEO Laurence Fink said the world's largest asset manager is making climate change central to its investment decisions going forward. (Mark Lennihan, File/The Associated Press)

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.
Climate change has become the top issue raised by clients, Fink said, and will affect everything from municipal bonds to long-term mortgages for homes.
The New York firm is taking immediate action, exiting investments in coal used to generate power, and will begin asking clients to disclose their climate-related risks.
"Because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself," Fink wrote in the letter. "In the near future — and sooner than most anticipate — there will be a significant reallocation of capital."
That shift is already underway.
Investors poured $20.6 billion into sustainable funds last year, nearly quadrupling the record it had set a year earlier, according to Morningstar. The industry has broadened in recent years, after starting with simple funds that bluntly excluded stocks deemed as harmful, such as gun makers or tobacco stocks.



Fink said in his annual letter to CEOs that energy transition will likely take decades and that governments and the private sector must work together to ensure it is fair and just. (Larry MacDougal/The Canadian Press)
Investors, particularly younger ones, increasingly say they want their money invested with an eye toward sustainability. Fearful of losing out on those dollars — and the fees that they produce — investment companies are rushing to meet the surging demand.
Fund managers increasingly say they consider environmental, social and governance issues in their broad investment strategy. It's known as "ESG" investing in the industry, and it means fund managers measure a company's performance on the environment and other sustainability issues along with its bottom-line financials when choosing which stocks to own.
ESG funds say such an approach can help investors' returns, rather than just their consciences, because it can help avoid risky companies, and the big losses they may have ahead of them in the future. Companies with poor records on the environment are more likely to face big fines, for example.
The European Union plans to dedicate a quarter of its budget to tackling climate change and has set up a scheme to shift 1 trillion euros ($1.4 trillion Cdn) in investment toward making the economy more environmentally friendly over the next 10 years.
The Europe Investment Plan, to be unveiled Tuesday, will be funded by the EU budget and the private sector. It aims to deliver on European Commission president Ursula von der Leyen's Green Deal to make the bloc the world's first carbon-neutral continent by 2050.
The shift by BlackRock is substantial. The firm has long been a target of environmental activists who have staged protests outside of its headquarters in midtown Manhattan. It has been hounded by some members of Congress who believe BlackRock could better address climate change with its vast economic heft.
Because of its size and reach, any shift in focus by BlackRock has the potential for much wider ramifications. The firm has operations in dozens of countries and is often called the world's largest shadow bank.
"Over time, companies and countries that do not respond to stakeholders and address sustainability risks will encounter growing skepticism from the markets, and in turn, a higher cost of capital," Fink wrote. "Companies and countries that champion transparency and demonstrate their responsiveness to stakeholders, by contrast, will attract investment more effectively, including higher-quality, more patient capital."

Climate change to drive 'massive' investment shift

14 January 2020

Image copyright GETTY

Concerns about climate change will drive a "fundamental reshaping of finance", one of the world's biggest money managers has said.


Larry Fink, who runs BlackRock, said the shift will happen "sooner than most anticipate".


His company has announced "sustainable" versions of its traditional investment options to meet demand from clients.


It has also said it would push firms to disclose more about a range of issues, including climate commitments.


While markets have been slow to reflect the worries about climate change, Mr Fink said the corporate world is now catching up.


"Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance," he wrote in an annual letter to chief executives.


"In the near future - and sooner than most anticipate - there will be a significant reallocation of capital."


Can big investors save the world?


Polluting firms 'will be hit by climate policies'


In a letter to clients, BlackRock - which manages nearly $7tn in assets - said it was taking a number of steps to respond to the investment risks linked to climate change.


In addition to the sustainable funds, it said its investors would be able to screen their portfolios for certain sectors.


For actively managed funds, the company also plans to sell its holdings of companies that derive more than 25% of their revenue from thermal coal production by mid-2020.

'Seriously consider sustainability'


Even if only 5% of investors opt for sustainable strategies, it will still produce "massive shifts", Mr Fink said.


"The commitments we are making today reflect our conviction that all investors - and particularly the millions of our clients who are saving for long-term goals like retirement - must seriously consider sustainability in their investments," he wrote in the letter to clients.


But, he added: "The choice remains with you".

Image copyright GETTY IMAGES

The Sierra Club, an environmental group, said BlackRock's announcements were a "major step in the right direction" that will put pressure on competitors to take similar steps.


But the fund manager continues to hold sizable investments in coal, oil and gas.


And the Sierra Club said it would be watching to see whether BlackRock flexes its shareholder muscle in upcoming climate-related votes at the companies it invests in.


"It is time to turn off the money pipeline to dirty fossil fuels for good," said Ben Cushing, the organisation's campaign representative.


"BlackRock should expand on its commitments and other financial institutions should follow suit."


Mr Fink's letter puts a spotlight on a growing trend among investors who worry about the industries they are funding.


Investments in some "sustainable" funds jumped to $20bn in 2019, nearly four times the previous year's record, according to data from Morningstar.


In the US, assets managed with sustainable investing strategies now represent more than a quarter of all investment assets under professional management, according to estimates by the Global Sustainable Investment Alliance.




World’s Largest Fund Manager to 'Reshape' Investment Portfolio to Consider Climate Crisis, Sustainability

BUSINESS

In response a report by Majority Action, members of New York Communities for Change (NYCC), Mothers Out Front (MOF), Sunrise Movement NYC, Sierra Club and 350Brooklyn gathered for a press conference on Sept. 17, 2019 outside BlackRock offices in New York City. Erik McGregor / LightRocket via Getty Images

BlackRock, an investment fund that manages nearly $7 trillion, will "reshape" its strategy toward investments that support environmental sustainability, according to a letter to investors from its founder and Chief Executive Larry Fink, as The New York Times reported.

In the letter, Fink wrote, "Climate change has become a defining factor in companies' long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance. The evidence on climate risk is compelling investors to reassess core assumptions about modern finance."
BlackRock's assets include massive investments in fossil fuels, including big oil producers such as BP, Shell and ExxonMobil. The investing giant has drawn the ire of environmentalists by routinely dismissing the climate crisis and voting against shareholder actions to direct corporate boards to address the growing climate emergency, as The Guardian reported.
Activists hailed the new declaration that the climate crisis will steer BlackRock's future investments. Bill McKibben, the founder of 350.org, which campaigns for divesting from fossil fuels, wrote on Twitter, "Biggest news in a long time. After a ton of pressure, Blackrock — which owns more fossil fuel stock than anyone on earth — announces it will put 'climate change at the center of its investment strategy.' A huge — if by no means final — win for activists!"
The ton of pressure McKibben referred to reached a fever pitch after BlackRock ranked amongst one of the companies with the worst voting records on climate issues. Last month, British hedge fund manager Christopher Hohn said it was appalling that BlackRock did not require companies to disclose sustainability efforts. Activists had staged protests outside BlackRock's office, and members of congress wrote to Fink to urge more climate-related investing, as The New York Times reported. Last month, in an interview with the Financial Times, former Vice President Al Gore asked if passive managers like BlackRock's would like "to continue to finance the destruction of human civilization, or not?"
"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," said Extinction Rebellion, as The Guardian reported.

BlackRock's plans to address the climate crisis will start with abandoning investments that "present a high sustainability-related risk," like coal producers. Fink hopes that BlackRock's lead will encourage every company, not just energy companies, to assess their carbon footprint, as The New York Times reported. BlackRock will also ask the companies it invests in to disclose plans for helping the world adhere to the Paris agreement to keep warming below 2 degrees Celsius above pre-industrial times, according to CNN.
The largest impact may be if BlackRock's decision is a watershed moment that triggers a conversation amongst financiers and policymakers about the climate crisis. It will also put pressure on other large financial players to articulate a clear sustainability strategy, as The New York Times reported.
Not only is changing an investment strategy that supports sustainability good for combating the climate crisis, but it can also be profitable. As The New York Times pointed out, "Had Mr. Fink moved a decade ago to pull BlackRock's funds out of companies that contribute to climate change, his clients would have been well served. In the past 10 years, through Friday, companies in the S&P 500 energy sector had gained just 2 percent in total. In the same period, the broader S&P 500 nearly tripled."
BlackRock will also join Climate Action 100+, which bills itself as an investor initiative to to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change.

While BlackRock's intention to join was welcomed by activists, anger and resentment lingers over the firm's past actions.
"Joining Climate Action 100+ is just a first step in the right direction for BlackRock; it must also respond to the fact that it is the world's biggest investor in deforestation," said Moira Birss, finance campaign director for Amazon Watch, in a press release. "The Amazon fires last fall and the wildfires in Australia today show the immense risk to the climate, forests, and indigenous peoples that deforestation-risk commodities pose. BlackRock must make its engagement with companies public and transparent with clear policies, deadlines, and ambitious timelines for shifting capital out of the worst offenders if they won't change."


RenewEconomy
BlackRock, world’s largest investment manager, pulls out of thermal coal

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