As published on royalgazette.com, Thursday January 23, 2020.
The world’s largest asset manager, BlackRock Inc, which is among the biggest shareholders in a number of coal insurers, has placed sustainability at the centre of its approach to investments.
It is now in the process of removing from certain of its investment portfolios the securities of companies that generate more than 25 per cent of their revenue from thermal coal production. It aims to complete this move by the middle of the year.
BlackRock oversees almost $7 trillion in investments. It is a shareholder in most insurance companies, including Markel Corporation and American International Group, which both have a presence in Bermuda, and Tokio Marine.
In a letter to clients, it said: “As part of our process of evaluating sectors with high ESG [environmental, social and governance] risk, we will also closely scrutinise other businesses that are heavily reliant on thermal coal as an input, in order to understand whether they are effectively transitioning away from this reliance.
“In addition, BlackRock’s alternatives business will make no future direct investments in companies that generate more than 25 per cent of their revenues from thermal coal production.”
Larry Fink, chief executive officer of BlackRock, in his 2020 letter to CEOs, said the investment risks presented by climate change are set to accelerate a significant reallocation of capital, which will in turn have a profound impact on the pricing of risk and assets around the world.
He said: “There is no denying the direction we are heading. Every government, company and shareholder must confront climate change.”
BlackRock’s move comes as pressure grows on the insurance industry to pull away from support or investment in the coal industry and fossil fuel production. The number of insurers withdrawing cover from coal projects more than doubled to 17 last year, among them was Axis Capital Holdings, Axa, Chubb, Hannover Re and QBE.
Commenting on BlackRock’s announced plans to place sustainability at the centre of its investment approach, Peter Bosshard, of climate-focused organisation The Sunrise Project, said it is likely to cause financial institutions and other investors and asset managers to follow its business model.
He told Intelligent Insurer: “BlackRock controls 2 to 3 per cent of shares of most insurance companies. They are among the ten biggest shareholders of numerous coal insurers including AIG, Tokio Marine, WR Berkley and the Markel Corporation. As well as this, they may well manage assets of certain insurance companies, and will certainly be an insurance customer.”