Blackrock Announces Climate Change/Sustainability Are Now Its Core Principles For Investing

In a stunning and groundbreaking turnaround, the CEO of the world’s largest asset manager with $7T under its control, BlackRock, announced that from now on the company will make its investment decisions with environmental sustainability as a core goal and will take climate change into account.  Not only that, BlackRock will, according to The New York Times, start to pull its money out of investments that “present a high sustainability-related risk,” such as those in coal producers, but they are also focused on the carbon footprint of all the companies in which they invest, not just energy firms, and want to see then increase in their sustainability, or else.

Why This Matters:  This is HUGE.  BlackRock is the single largest investor in fossil fuels in the world.  And they are getting out of that business.  Boom!  The decision was not one made out of a sense planetary altruism, but instead because a “portfolio that focuses on sustainability and climate change” will “outperform.” “We are fiduciaries,” he told The Times, and he told CNBC that the protesters and “politics” were “not a meaningful part” of the company’s decision process.  He claimed to have been more moved by his own internal researchers who did a deep dive into the science, and by a sense that the “lens of sustainability will increasingly be important to a new generation of investors.”  Young people are making a difference even when it comes to the world of finance. And FWIW, the pressure from protesters cannot be dismissed so lightly, even if he says it was not a factor.  The pressure this decision puts on the rest of the investing world cannot be understated.  But BlackRock still believes greater government action is needed as well to meet the challenge.  Indeed.

Highlights From the Letter:

CEO Larry Fink’s assessment can be summed up in this quote from the letter,

“Climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect. But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”  Other key quotes include:

  • “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance. Research from a wide range of organizations – including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others … is deepening our understanding of how climate risk will impact both our physical world and the global system that finances economic growth.”
  • “Over the next few years, one of the most important questions we will face is the scale and scope of government action on climate change, which will generally define the speed with which we move to a low-carbon economy. This challenge cannot be solved without a coordinated, international response from governments, aligned with the goals of the Paris Agreement.”

Environmental organizations that had been campaigning against BlackRock and other large banks and financial institutions crowed.  Sierra Club campaign representative Ben Cushing said: “The financial giants propping up the industries driving us towards climate disaster can no longer escape public scrutiny. 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…and other financial institutions should follow suit.”

To Go Deeper:  Read the Fink letter in full.  And CNBC did an excellent interview with Fink where he lays out his thinking in detail, which you can watch here.

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