BlackRock CEO Larry Fink is promising to pay attention to the climate crisis and avoid investing in companies that “present a high sustainability-related risk” in his widely-read and influential annual letter to chief executives of the world’s biggest companies.
“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Fink wrote in the letter, obtained by The New York Times. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”
Fink’s annual missive “is closely watched, and in the 2020 edition he said BlackRock would begin to exit certain investments,” like coal producers, the Times says. “His intent is to encourage every company, not just energy firms, to rethink their carbon footprints.”
And since BlackRock is the world’s biggest asset manager, with US$7 trillion invested, “this move will fundamentally shift its investing policy—and could reshape how corporate America does business and put pressure on other large money managers to follow suit.”
Two years ago, Fink made waves with an annual letter that said businesses must have a purpose beyond profits. “Now Mr. Fink is sounding an alarm on a crisis that he believes is the most profound in his 40 years in finance,” the Times says.
“Even if only a fraction of the science is right today, this is a much more structural, long-term crisis,” Fink wrote.
The letter says BlackRock will “introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability, and press companies to disclose plans ‘for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than 2.0°C is fully realized’,” the Times says.
While Fink is apparently known as a long-time Democrat, he told the Times his decision to focus this year’s letter on climate risk was strictly business. “We are fiduciaries,” he said. “Politics isn’t part of this.”
The Times chronicles the protests and skepticism BlackRock has encountered for its slow response so far to the climate emergency and the investment risk it creates.
“In that context, Mr. Fink’s move is a watershed—one that could spur a national conversation among financiers and policy-makers,” even if “some of the most ardent climate activists will see it as falling short,” writes reporter Andrew Ross Sorkin. “The new approach may put pressure on the other large money managers and financial firms in the United States—Vanguard, T. Rowe Price, and JPMorgan Chase, among them—to articulate more ambitious strategies around sustainability.”
Last week, BlackRock announced it was joining Climate Action 100+, a two-year-old campaign pressing the world’s biggest corporations to take action on the climate crisis. That move brought the total assets under management by the more than 370 participating global investors to US$41 trillion.