The world's biggest fund manager, BlackRock, said on Tuesday it is making sustainability and transparency the center of its investment strategy as it expects investment risks presented by climate change to speed up a significant reallocation of capital.
BlackRock will exit thermal coal producers, make sustainability the key part of risk management and building portfolios, and launch exchange traded funds (ETFs) that screen fossil fuels, among other measures, to show clients that bit is taking their environmental, social, and governance (ESG) concerns into account.
"Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk. Indeed, climate change is almost invariably the top issue that clients around the world raise with BlackRock," the asset manager's chairman and CEO Larry Fink said in a letter to CEOs.
"In the near future - and sooner than most anticipate - there will be a significant reallocation of capital," Fink said.
Yet, BlackRock's passive index-tracking funds cannot divest shares of companies that are found to not have met the new standards, Bloomberg Opinion columnist Mark Gilbert says.
Some asset managers, including BlackRock, continue to draw criticism from climate activists for their lack of support for climate resolutions and for siding with the oil and gas industry.
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A recent report from non-profit organization Majority Action found that BlackRock backed just five out of 41 climate-critical resolutions at shareholders' meetings in 2019.
BlackRock and Vanguard were called out in the report because "they were also more likely to support management at these fossil fuel intensive companies than they did across U.S. equities overall."
Extinction Rebellion was quick to comment on BlackRock's announcement that it would put sustainability at the center of its investment strategy.
"BlackRock remains waist-deep in fossil fuel investments and 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," Extinction Rebellion said in a statement.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More