Blackrock has announced it will put environmental sustainability at the core of its investment strategy, following criticism the asset management titan has failed to use its power to combat climate change.
The world’s largest asset manager announced a sweeping overhaul in a bid to position itself as a sustainable investment leader, pledging to take steps including lowering its exposure to fossil fuel companies — a key demand of environmental campaigners.
Chief executive Larry Fink announced the changes in a letter sent to clients on Tuesday alongside his annual letter to chief executives, in which he said climate change represented an unprecedented risk to markets.
“Climate change is different. Even if only a fraction of the projected impacts is realised, this is a much more structural, long-term crisis,” Fink said.
“Companies, investors, and governments must prepare for a significant reallocation of capital.”
Writing to clients, he said that Blackrock — which manages $7 trillion (£5.4 trillion) in assets — would now assess environmental, social and governance (ESG) “same rigor that it analyses traditional measures such as credit and liquidity risk”.
“I believe we are on the edge of a fundamental reshaping of finance,” Fink said.
As part of the new investment strategy, Blackrock will cut companies that derive a quarter or more of their revenues from thermal coal from its actively managed portfolios, as well as doubling the number of sustainability-focused exchange traded funds it offers to 150.
The asset manager is also aiming to increase its sustainable assets tenfold within a decade, from $90bn to $1 trillion.
Blackrock’s strategy overhaul follows sustained pressure on the asset manager and wider industry from campaigners.
It also comes just days after it signed up to the investor pressure group Climate Action 100+, which is campaigning for major CO2 emitters to cut pollution.
In his letter to chief executives, Fink calls on companies to step up their efforts to tackle climate change or face increasing anger from investors.
“Every government, company, and shareholder must confront climate change,” he said.
Fink also threatened that Blackrock would vote to remove directors of companies it judges to have taken insufficient action.
“We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them,” he said.
Jeanne Martin, campaign manager at investment charity Share Action, called the decision to quit coal produces “yet another significant blow to the already dying market”, but called on Blackrock to “use its voting rights to get major coal financiers to do the same”.
Share Action recently coordinated a major shareholder resolution on climate change at Barclays, calling on the bank to stop financing fossil fuel firms.
Martin welcomed Blackrock’s “commitment to improve transparency of its stewardship activities”, but added: “for far too long the asset manager has kept everyone in the dark about the companies it was meeting with, the topics discussed, and most importantly the outcome of those engagements.”
“But we might not like what we see when we open the door on these activities: Blackrock’s current voting disclosures on climate issues give little comfort that it will vote in a manner fitting of the climate crisis.”
Extinction Rebellion staged demonstrations outside Blackrock’s London offices in October and November last year, protesting what they described as its role in the growing climate emergency and destruction of the Amazon.
The campaigning group criticised Blackrock following the announcement.
“It’s not always the case that something is better than nothing, particularly if it’s used to distract from the truth. And the truth is that the world’s biggest miners and polluters will not be losing any sleep over this,” said an Extinction Rebellion spokesperson.
“BlackRock remains the world’s top backer of companies that destroy the Amazon rainforest and ignore the rights of indigenous people. BlackRock can rest assured that we will continue to pile on the pressure until they act to protect our children and the natural world.”