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Major Investment Firm Is Changing Its Strategy in Reaction to the Climate Crisis

BlackRock will exit deals that present a high sustainability-related risk.
BlackRock | Source: Shutterstock
  • Reuters

NEW YORK, United States — BlackRock Chief Executive Larry Fink has warned company boards to step up efforts to tackle climate change, marking a significant shift in the public stance of the world's biggest investment manager amid mounting concerns about global warming.

In his annual letter to chief executives, Fink said they must act or face increased wrath from investors concerned about how unsustainable business practices might curb their future wealth.

He said BlackRock would exit investments that presented high sustainability-related risk, including thermal coal producers, as it participated in what he described as a "fundamental reshaping of finance."

Activists hailed the move, which followed a campaign over BlackRock's perceived prior lack of action, as significant.

"As the biggest financial institution in the world, BlackRock’s announcement today is a major step in the right direction and a testament to the power of public pressure calling for climate action," said Ben Cushing of the US-based environmental group Sierra Club.

The shift in global investing trends towards large investment managers such as BlackRock, Vanguard Group and State Street Corp has made them a potentially powerful lever for forcing wider corporate action.

But activists have criticised them for not doing enough, and in December some said they would be monitoring Fink's letter closely for signs of greater engagement with the climate crisis.

Diana Best, senior strategist for the Sunrise Project which is part of a campaign group that has lobbied BlackRock to take action, said its move "instantly raises the bar for competitors such as Vanguard and State Street Global Advisors."

Vanguard and State Street did not immediately respond to requests for comment.

A Reuters analysis in October found these large index fund managers rarely challenge company management.

BlackRock is also strengthening its commitment to transparency in its stewardship activities, with portfolio managers "increasingly disposed to vote against management" if they felt companies were not making "sufficient progress on sustainability-related disclosures."

The investment giant did not give specific details on which companies it would divest from or the size of those positions.

Fink's letter specifically aligns BlackRock with the goals of the landmark 2015 Paris Agreement, in contrast with the recent stance of the United States which under President Donald Trump has backed away from the climate accord.

"Every government, company and shareholder must confront climate change," Fink said.

As well as applying pressure on companies through campaigning, activists in recent months have succeeded in winning over major investors in the financial sector to their cause.

Barclays investors, at the urging of lobby group ShareAction, earlier this month submitted a motion that would force the lender to phase out fossil fuel financing faster.

Activists on Tuesday urged BlackRock to back its new stance by voting in favour of such resolutions.

"If BlackRock is serious about its commitment to phase out thermal coal, it should use its voting rights to get major coal financiers to do the same," said Jeanne Martin, campaign manager at ShareAction.

By Sinead Cruise and Lawrence White; editors: Iain Withers, Mark Potter and Emelia Sithole-Matarise.

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