BlackRock, the world’s largest asset manager, have declared that they’re embracing sustainable investing. It’s a welcome commitment from a firm that controls over $6 Trillion USD in assets under management, roughly equal to the world’s top 20 pension funds combined. That kind of investor muscle can make a big difference when brought to bear in company engagements on climate change and other sustainable investing issues.
But, despite its stated intentions, BlackRock still has billions invested in companies with business models that are not in alignment with the Paris climate agreement to keep global warming well below 2˚ C.
Coal power: BlackRock is the largest investor in new coal plant development worldwide.
Oil and gas: BlackRock is one of the largest investors in global oil and gas companies, including the top carbon reserve owners.
Deforestation: BlackRock has major holdings in soy, beef, and palm oil corporations driving deforestation in the Amazon and Southeast Asia.
BlackRock seems to understand change is needed.
CEO Larry Fink’s recent letters to investors have explicitly called out companies that don’t make positive contributions to society as bad investments:
“Society is demanding that companies, both public and private, serve a social purpose. Every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
- BlackRock CEO Larry Fink, 2017 Letter to Investors
BlackRock must invest for the Paris climate agreement.
A few things BlackRock could do to make its actions match its statements on sustainable investing:
Offer more fossil free funds. Our analysis shows that BlackRock, under its main brand and under its iShares ETF brand, offers a number of funds marketed as sustainable investments, but only one earns our highest fossil-free rating. Investors (and the planet) would benefit if BlackRock offered more options that deliberately avoid coal, oil and gas, and fossil-fired utility companies.
Hold corporate behaviour accountable through proxy voting and direct engagement with corporate managers. BlackRock supported only 23% of climate-related shareholder proposals in the 2017-2018 proxy season, according to a recent scorecard from the 50/50 Climate Project. BlackRock should be voting in favor of sensible climate proposals, and challenging corporate executives and board members who oppose them.
"Certain asset managers, including BlackRock, refuse to vote in favor of shareholder proposals if the companies concerned are engaging with the asset manager. This “either-or” approach to non-binding proposals may strike climate-aware investors as unnecessarily timid..."
- Asset Manager Climate Scorecard 2018, 50/50 Climate Project
- Adopt an engagement timeline for companies that refuse to act. As You Sow’s recent report 2020: A Clear Vision for Paris Compliant Shareholder Engagement suggests a 2-year timeline for asset owners to challenge companies with business models that are fundamentally incompatible with the Paris climate agreement, and to divest if the companies refuse to produce plans to transition.
"Shareholders that remain invested in oil & gas must, at a minimum, demand that the companies develop transition paths... Companies that refuse to plan for transition have by their own volition declared themselves to be rogue global actors. Shareholders that continue to support companies engaging in globally destructive action become complicit in both the risk and the outcome."
- 2020: A Clear Vision for Paris Compliant Shareholder Engagement