BlackRock step up on climate change

One of the biggest shareholders in the oil and gas industries has stepped up its efforts on environmental issues, with its chief executive calling on companies to do more to combat climate change.  

Last week, BlackRock, the world’s largest asset manager, joined influential climate change investor group, Climate Action 100+. The organisation, which represents $41 trillion in investor assets, actively pushes companies to reduce their greenhouse gas emissions, focusing on the worst offenders.

The decision to back the group appears to signal a major turnaround for BlackRock, which has been heavily criticised for failing to support environmental-related issues.

Last year it was exposed for having one of the poorest climate-related proxy voting records.

A report by Majority Action in September, which analysed asset managers’ 2019 voting records on climate-related shareholder proposals and CEO pay at energy and utility companies, found BlackRock repeatedly voted with management in opposing climate risk mitigation suggestions.

Together with Vanguard, BlackRock voted against every proposal supported by Climate Action 100+. In 16 of the cases, BlackRock’s support would have led to majority votes, according to Majority Action.

However, BlackRock’s alliance with Climate Action 100+ seems to suggest the firm might now use its proxy powers to instigate more positive action on company boards.

Climate Action 100+ believes the addition of BlackRock, which has more than $6.8 trillion in assets, will add more punch to its lobbying activities.

“BlackRock is one of the largest and most influential asset managers in the world and will bring even more heft to investor engagement through Climate Action 100+,” said Emily Chew, Climate Action 100+ Steering Committee chair and global head of ESG research and integration at Manulife Investment Management.

Despite the voting record, even last year, BlackRock’s chairman and CEO Larry Fink appeared to be yielding to climate change concerns. In his 2019 letter to global corporate CEOs, he declared there was an “extricable link” between purpose and profit – and warned bosses society was looking to companies to address pressing social issues such as sustainability.

This year, however, he went a step further, stating that “climate change has become a defining factor in companies’ long-term prospects”.

In his 2020 letter, he told bosses “in the near future – and sooner than most anticipate – there will be a significant reallocation of capital”, apparently warning them of a change in investor mood away from companies that did not take environmental considerations seriously.

Indeed, both the CEO letter and announcement of support for the climate change group comes at a pivotal moment as environmental groups and scientists have warned of the earth reaching a point of “no return”, with the last decade being the hottest on record.

“The physical and economic threats of climate change have again been evident in the devastating and unprecedented bushfires raging across Australia,” said Emma Herd, member of the Climate Action 100+ Steering Committee and CEO of Investor Group on Climate Change (IGCC).

“We need deeper and more urgent action from those companies who hold the key to making the zero-emissions transition that will de-risk our economies and communities from climate change. This signal from the world’s largest asset manager that they expect companies to be cutting their emissions in line with the Paris Agreement is an important step towards this necessary transition,” Herd said.

In a statement following its Climate Action 100+ membership, BlackRock said it was accelerating its engagement with companies on the critical issue of climate risk as its impact on investment portfolios becomes more evident.

The company wields significant influence over the world’s biggest polluters. An investigation by the Guardian last year revealed that BlackRock’s retail investment in fossil fuel companies totalled more than $87 billion. The firm is regarded as one of the largest investors in coal worldwide.

The investment titan may also have its own interests in pushing corporates to take more urgent climate action after a report by the Institute for Energy Economics and Financial Analysis (IEEFA)  last July showed it lost an estimated $90 billion over the last decade by investing in fossil fuels and missing out on growth in clean energy investments.

The report revealed that BlackRock’s multibillion-dollar investments in big oil companies, Chevron, ExxonMobil, BP and BP – were responsible for the bulk of its losses.

Last Updated: 17 January 2020
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