BlackRock takes tougher stance on climate after activist heat
LONDON — 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 CEOs on Tuesday, Fink forecast a “fundamental reshaping of finance” and said companies must act or face anger from investors over how unsustainable business practices might curb their future wealth.
Fink said in a second letter to BlackRock clients that it will by mid-2020 sell off from its actively managed client portfolios stakes in companies that derive more than 25% of their revenues from thermal coal production.
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 U.S.-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 criticized 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.”
Investors have begun to put their money into more climate-friendly funds, albeit the overall size of the action is still small. Investments in exchange traded sustainable funds grew to $20 billion in 2019, according to data from Morningstar, nearly 4 times the previous year’s record.
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 favor 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.
(Reporting By Sinead Cruise and Lawrence White, editing by Iain Withers/Mark Potter/Emelia Sithole-Matarise/Jane Merriman)