CEO Larry Fink has called for “a fundamental reshaping of finance” in response to the climate crisis, but BlackRock remains the largest investor in fossil fuels and the companies driving deforestation around the world.
Today, Larry Fink, CEO of BlackRock issued his highly anticipated annual letter to the CEOs of the companies in which it invests — the theme of which was how the climate crisis should be, and already is, changing the face of finance.
As Fink asserts in the letter: “Climate change has become a defining factor in companies’ long-term prospects. The evidence on climate risk is compelling investors to reassess core assumptions about modern finance. … Even if only a fraction of the science is right today, this is a much more structural, long-term crisis.”
In light of this, Fink goes on to outline a sweeping new set of policies that aim to put climate change and sustainability at the center of BlackRock's business model. According to the letter, BlackRock — the world’s largest asset manager, with nearly $7 trillion in investments — will undertake “a number of initiatives to place sustainability at the center of our investment approach, including:
making sustainability integral to portfolio construction and risk management;
Changing our systems for a healthy, post-COVID world
Hear insights from Janine Benyus, Lynne Twist and Andrew Winston on how we got here — and what nature tells us about how to build a global economy that better, and more sustainably, serves the needs of humanity for today, and for the future — at the SB Leadership Summit, SB's first virtual event, June 1-2.
exiting investments that present a high sustainability-related risk, such as thermal coal producers;
launching new investment products that screen fossil fuels; and
strengthening our commitment to sustainability and transparency in our investment stewardship activities.”
The company will also “be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
While Fink has long been vocal on the need for social and environmental responsibility on the part of the corporate world; climate activists, investors, legislators and thought leaders have been just as vocal about BlackRock’s continued unwillingness to put its money where Fink’s mouth is on these issues — the asset manager still remains the largest investor in fossil fuels and the companies driving deforestation around the world.
But some members of the opposition found Fink’s announcement and BlackRock’s new policies an important step in the right direction.
"BlackRock's new initiatives match the size of the crisis we're seeing in 2020 and are the direct result of an outpouring of pressure from the global climate movement,” said Diana Best, Senior Strategist for the Sunrise Project, a core partner of the BlackRock's Big Problem campaign. “BlackRock beginning its shift of capital out of fossil fuels, including today's divestment of coal in its actively managed funds, is a fantastic start and instantly raises the bar for competitors such as Vanguard and State Street Global Advisors. We will be looking for additional leadership from the company in, as Larry Fink put it, 'fundamentally reshaping finance to deal with climate change,' including additional shifts of capital out of fossil fuels."
As one of the largest shareholders in most companies, an important litmus test for BlackRock's new climate leadership will be how it votes in the 2020 shareholder season on the many climate resolutions that have already been filed, including at other major financial institutions.
Jeanne Martin, campaign manager at ShareAction, said: "BlackRock's coal divestment decision is yet another significant blow to the already dying market, yet major banks like Barclays continue to prop up coal-heavy companies. 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. Larry Fink talks a lot about companies' purpose, but there are questions left unanswered about what BlackRock's own purpose is; and how its stewardship delivers the social, environmental and financial performance that its clients are looking for."
A 2019 report from Majority Action highlighted BlackRock's voting record and lack of leadership on climate-related issues — it found that if BlackRock and Vanguard had voted in favor, 16 critical climate resolutions would have passed at US companies in 2019.
Last week, a coalition of leading climate, youth, and Indigenous organizations launched a major new mobilization called Stop the Money Pipeline, aimed at pressure banks, insurance companies, and asset managers — including BlackRock — to stop financing fossil fuels and deforestation and start respecting human rights and Indigenous sovereignty.
"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. But BlackRock will continue to be the world's largest investor in coal, oil and gas,” said Sierra Club campaign representative Ben Cushing. “It is time to turn off the money pipeline to dirty fossil fuels for good. BlackRock should expand on its commitments and other financial institutions should follow suit."
Today's announcement, however, did not indicate how BlackRock will address issues related to indigenous rights or deforestation, the second-largest driver of climate change.
Moira Birss, Finance Campaign Director at Amazon Watch, said: "This announcement is a major step in the right direction for BlackRock. However, it still leaves questions about how it plans to address the fact that it is the world's biggest investor in deforestation. Will deforestation risk be part of its new engagement and voting priorities? What about indigenous rights? 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. Consistently bad actors like Brazilian beef giant JBS won't change without strong, concrete action from asset managers like BlackRock."