BlackRock, the world’s largest asset manager, is vowing to make climate change central to its investment strategy and pressuring other companies to reduce their carbon footprints.
BlackRock CEO Laurence Fink warned business leaders Tuesday that climate change has become a “defining factor” in the long-term outlook.
“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Fink said in his annual letter to U.S. corporate leaders. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”
BlackRock has faced activist pressure to use its power, as a manager of $7 trillion in assets, to push for transitioning to a low-carbon economy.
It announced changes to its own investment practices, such as focusing on sustainability; exiting investments that present a high sustainability-related risk, such as thermal coal producers; and launching new investment products that screen fossil fuels.
BlackRock also joined Climate Action 100+ last week, becoming part of a network of companies pushing businesses for more transparency and aggression in cutting emissions.
Its actions could provide cover to some of the nation’s largest banks, which have faced criticism for underwriting fossil fuel investments, to consider climate change risk in its lending decisions. BlackRock is one of the biggest owners of U.S. banks, including JPMorgan Chase, Bank of America, and Wells Fargo.
BlackRock is encouraging companies to disclose plans for operating under a scenario where the world meets the Paris Agreement’s goal of limiting global warming to less than 2 degrees Celsius.
Fink said BlackRock would be “increasingly disposed to vote against management and board directors” when companies are not making sufficient progress on setting strategies to reduce emissions, and disclosing what they are.
Nevertheless, BlackRock won’t exit the business of fossil fuels entirely and will remain one of the biggest investors in oil and gas.
“Despite recent rapid advances in technology, the science does not yet exist to replace many of today’s essential uses of hydrocarbons,” Fink said. “We need to be mindful of the economic, scientific, social and political realities of the energy transition.”
