10/01/20

WEALTH MANAGEMENT: BlackRock Joins $41 trillion Climate-change Investing Pact.

As published on marketwatch.com, Thursday January 9, 2020.

BlackRock, the world’s largest asset manager with more than $6.8 trillion under its control, becomes the latest signatory to Climate Action 100+, an influential big-money pact that’s pushing — although with spotty results so far — many of the world’s largest greenhouse-gas emitters to take action on man-made climate change.

BlackRock joins more than 370 global investors, including pension giant CalPERS and HSBC Global Asset Management, already participating in the initiative, which aims to sway companies ranging from fossil-fuel producers to consumer-product conglomerates to be carbon neutral by 2050. With BlackRock on board, total assets under management represented by Climate Action 100+ now top $41 trillion.

“Given BlackRock’s size and influence, their commitment to accelerating engagements with the largest corporate greenhouse gas emitters on climate change sends a powerful signal to companies to reduce emissions, improve corporate governance and strengthen their disclosure,” said Mindy Lubber, a member of the Climate Action 100+ steering committee and CEO and President at Ceres, which advocates for sustainability-minded investors, in a release.

As for BlackRock, “this is a natural progression of the work our Investment Stewardship team has done to date. We believe evidence of the impact of climate risk on investment portfolios is building rapidly and we are accelerating our engagement with companies on this critical issue,” said spokesman Farrell Denby, in an e-mail response to a question asking why the firm has joined now.

BlackRock Chairman and CEO Larry Fink in an annual letter released more than a year ago shook up the sustainable investment world with an explicit declaration that asset managers could and should enjoin conscientious market choices and a focus on returns, and no longer consider one exclusive of the other.

“Sustainable investing will be a core component for how everyone invests in the future,” Fink wrote then.

“Larry Fink is okay with saying the word ‘sustainability.’ Simply acknowledging that making money at the cost of losing our planet is unsustainable is an extraordinary step forward for the masters of Wall Street,” wrote early environmental, social and governance (ESG) investing advocate Amy Domini, of Domini Impact Investments, at the time.

It’s clear why Climate Action 100+ is welcoming the asset-management heavyweight. The advocacy group late last year issued a two-year report card on in its five-year initiative. Results revealed that big-name converts such as Royal Dutch Shell RDS.A, -0.02% and BP BP, +0.31% may be yielding in part to investor pressure to align with the Paris Climate accord, but they are still a rarity.

The participation analysis released in October of 161 focus companies found that 70% had set long-term emissions reduction targets, but just 9% had targets that are in line with or go beyond the minimum goal of the Paris Agreement. The Paris goal is to keep the rise in global temperature to below 2 degrees Celsius.

The initiative’s target polluters are under no obligation to follow the investor group’s prodding but are increasingly exposed in the public arena and through shareholder action and they are responsible for more than two-thirds of global industrial greenhouse-gas emissions and have a combined market capitalization in excess of $8 trillion.

The persuasion of BlackRock and others to dial up the pressure on industrials, transportation firms and the other sectors they invest in may be linked to the ongoing devastating headlines out of Australia, where bushfires are raging across the country, said Emma Herd, another member of the Climate Action 100+ steering committee and CEO of the Investor Group on Climate Change.

Experts say climate change has exacerbated the unprecedented wildfires around the world. Australian Prime Minister Scott Morrison has been criticized for his refusal to say climate change is impacting the fires, instead deeming them a natural disaster. For many in the private sector, including investing groups, private-sector action may have to lead where government policy does not.

Climate Action 100+ attempts to engage with and hold companies accountable in several ways, including by stressing action to reduce greenhouse gas emissions across the value chain in line with the overarching goals of the Paris climate accord; by encouraging implementation of a strong governance framework which clearly articulates a board’s accountability and oversight of climate change risks and opportunities; and by working toward improved and uniform corporate disclosure in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).