The world’s largest asset manager, BlackRock, has threatened to dump companies that fail to act on climate change or fail to disclose their climate-risk plans.
In separate letters to company chief executives and to clients, BlackRock chief executive Larry Fink pledged to support the global effort to achieve net zero emissions and called on investee companies to disclose their own plans to support the transition to a net zero economy and how these plans will be “incorporated into your long-term strategy and reviewed by your directors”.
Fink warned companies that a lack of progress would lead BlackRock to “not only use our vote against management for our index portfolio-held shares, we will also flag these holdings for potential exit in our discretionary active portfolios because we believe they would present a risk to our clients”.
BlackRock has almost $8.7 trillion in assets under management, including more than $5 trillion in passive funds.
Fink also called for a single global standard for climate-related risk reporting, noting that the current “variety of reporting frameworks creates further complexity for companies”.
Fink’s letter to clients last year also noted the impact of climate-change on investment risk and BlackRock made a number of simialr commitments, including a pledge to divest from companies that made more than 25% of their revenues from thermal coal.
However, the impact of the pandemic has seen a tectonic shift as “the reallocation of capital accelerated even faster than I anticipated” wrote Fink.
“From automobiles to banks to oil and gas companies… companies with better ESG profiles are performing better than their peers, enjoying a ‘sustainability premium’,” stated Fink.
BlackRock has also come under considerable pressure from environmental activists in the last year for its climate change credentials. A study by thinktank InfluenceMap, published earlier this month, called on the funds industry to accelerate its engagement with the companies over climate change.
While it did call for stronger action, the report did award BlackRock with an improved engagement score from C+ to B, noting that it had voted for 24% of climate-related shareholder resolution, compared to just 5% in the previous year.
The latest commitments also put BlackRock more in line with other global investment managers. In December 2020 a group of 30 firms including Legal and General Investment Management, Schroders and Fidelity International pledged to only invest in companies with net zero emissions by 2050.
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