BlackRock to put climate in its financial strategies

BlackRock,the world’s largest asset manager with investments in Oklahoma ranging from oil and gas operations to the Oklahoma Public Employees Retirement Fund wants to make climate change a pillar of its corporate strategy and mission.

CEO Larry Fink announced his intentions this week in his annual open letter, writing that climate is a “defining factor in companies’ long-term prospects” and that “we are on the edge of a fundamental reshaping of finance.”

BlackRock has about $7 trillion in assets that it manages and has been under growing pressure from climate-change activists to do more toward the global transition to low-carbon energy.

 

The company announced a suite of new steps on climate and weaving sustainability into its investment products, including…

  • Offering “sustainable versions of our flagship model portfolios.” They will “use environmental, social, and governance (ESG)-optimized index exposures in place of traditional market-cap-weighted index exposures.”
  • Doubling the number of ESG-focused exchange-traded funds it offers over the next few years and new tools to help clients screen out fossil fuels.
  • Dropping companies that produce coal used in power production from its active investment portfolios. It applies to companies that derive more than a quarter of their revenue from thermal coal production.
  • More broadly, BlackRock is vowing more “sustainability integration” into its active investment portfolios.
  • A tougher posture on climate-related shareholder resolutions. “[W]e will be increasingly disposed to vote against management when companies have not made sufficient progress,” it said. The company has faced criticism for voting against key shareholder resolutions that push companies to take stronger steps.

The moves come days after BlackRock joined the investor advocacy network Climate Action 100+.

The letter hints at why BlackRock will face continued criticism from activists who want more aggressive movement away from fossil fuels.

  • “Despite recent rapid advances, the technology does not yet exist to cost-effectively replace many of today’s essential uses of hydrocarbons,” Fink tells CEOs.
  • “We need to be mindful of the economic, scientific, social and political realities of the energy transition,” he adds.
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