Investing in fossil fuels has come at a hefty price for BlackRock according to a report warning that the world’s largest asset manager is ignoring the serious risks involved with putting cash into companies dependent on dirty energy – but the firm has contested that the findings are misguided.
The US fund house lost investors more than $90 billion (€81.1 billion) from holdings in fossil fuel-dependent companies over the last decade, research by the Institute for Energy Economics & Financial Analysis (IEEFA) found.
Out of these losses, 75% was due to investments in four companies alone – ExxonMobil, Chevron, Royal Dutch Shell, and BP – which have all underperformed the market in the last ten years, the organisation said.
BlackRock, which manages over $6 trillion of assets, has disputed the study. The large majority of its equity holdings, it said, including those cited by the IEEFA, are held through index-based exchange-traded funds and other index products that track the investment results of third-party indices.
“Index managers such as BlackRock seek to replicate the performance of the index and do not select or exclude one company over the other based on our views of a company,” the firm said in a statement.
“Index providers determine which companies to include in the indices they create based on the index methodology. The conclusions of this report are thus misplaced.”
Yet according to IEEFA, BlackRock “maintains it has little control” over its $4.3 trillion passively managed portfolio. The organisation called on investors to question where their money is going.
“BlackRock is both behind the curve on coal and in reading the energy transition,” said Tom Sanzillo, co-author of the report and former first deputy comptroller of New York State, where the fund giant is headquartered.
“A diversified portfolio is not an excuse to lose money,” he said.
In IEEFA’s view, BlackRock needs to be leading the way in its approach to fossil fuel investments and demonstrating stronger leadership, pointing out that it is “bigger than Japan, the third largest economy in the world”.
“As the world’s largest universal owner, BlackRock wields an enormous amount of influence and shoulders a huge responsibility to the wider community,” said fellow co-author of the report and IEEFA director Tim Buckley.
“It has the power to lead globally to address climate risk, yet to-date it remains a laggard.”
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