BlackRock’s Message to Companies: Adapt or Die

Image: BlackRock

By Amy Lupica, ODP Staff Writer

On Tuesday, the CEO of Blackrock, the world’s largest asset management company, announced in his yearly letter to his clients that they must layout comprehensive game plans to survive in a net-zero world. As more governments make ambitious commitments to greatly reduce or eliminate their carbon footprint by 2050, CEO Larry Fink warns that climate risk equals financial risk. Some other major financiers are already making moves to divest from fossil fuels and invest in green energy, and many corporations that rely on those investments have taken steps to invest in clean energy. But Fink says if they don’t integrate that attitude into every part of their long-term business model, they risk future failure.

Why This Matters: A 2020 report from portfolio.earth found that the world’s largest investment firms and banks are investing trillions each year into operations that damage the environment and threaten biodiversity. Recently, we’ve seen big banks pulling out of mining and drilling operations; just recently, three European banks pulled out of oil extraction in the Ecuadorian Amazon. But 35 of the world’s largest banks have avoided aligning themselves with the goals of the Paris Agreement. This urgent message from an industry leader – adapt or die – could be an incentive for other industry players to follow suit.

BlackRock’s Power Play

Now, the firm will encourage all clients to report their current greenhouse gas emissions and present a plan for how they’ll ensure they meet the Paris Climate Agreement targets by 2050. Fink controls $9 trillion in assets and already, Fink has begun voting his shares against companies that are unable to show “significant progress on the management and reporting of climate-related risk, including their transition plans to a net-zero economy.” In response, 61 companies signed onto common standards, including Bank of America, Fidelity, Heineken, IBM, Mastercard, Nestlé, PayPal, Sony, and Unilever, among others.

What does this announcement do?

Fink said that Blackrock will implement “heightened scrutiny” when determining which assets it will include in its portfolios. The firm will also publish the details of the proportion of its assets that align with the Paris Agreement goals. It has also implemented a policy by which the firm will sell out of coal companies.

What doesn’t it do?

While Fink has encouraged companies to layout rigid climate plans, he hasn’t specified what BlackRock’s standards for these plans will be. Additionally, although he commits to higher standards, he doesn’t commit to divesting from fossil fuels and other destructive industries. Reporting of emissions will also be voluntary for most companies, which means that some may avoid reporting without consequences.

While Fink’s letter represents a positive shift in industry priorities, Lara Cuvelier, sustainable investment campaigner at Reclaim Finance, isn’t satisfied. “Larry Fink’s new net-zero commitment could be a positive step if it were paired with concrete and immediate action to stop investing in new fossil fuels. But a year after its first, extremely weak coal commitment, BlackRock has yet to announce a more ambitious policy,” she said.

To Go Deeper: Read Fink’s full letter here.

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