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Business

BlackRock shifts investment strategy to tackle climate change

By
Noah Manskar
Published Jan. 14, 2020
Updated Jan. 14, 2020, 8:02 p.m. ET

After years of criticisms over his fossil-fuel holdings, Larry Fink is finally talking the talk on climate change.

The boss of BlackRock — the world’s largest money manager with nearly $7 trillion in assets — said Tuesday he will exit investments that pose a “high sustainability-related risk,” such as companies that generate more than a quarter of their revenues from coal.

Fink — who has been repeatedly blasted by environmental activists for his firm’s vast ownership of fossil-fuel companies — said BlackRock will likewise vote against directors and management if they don’t adequately account for climate-related risks.

“Even if only a fraction of the projected impacts (of climate change) is realized, this is a much more structural, long-term crisis,” Fink wrote in his annual letter to CEOs. “Companies, investors, and governments must prepare for a significant reallocation of capital.”

Cynics pounced on the tough-talking letter, however, noting that two years ago Fink decreed in a letter to CEOs that “every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

That’s despite the fact that BlackRock through its numerous index funds has remained a top holder in companies selling everything from oil to opioids.

In September, BlackRock opened an office in Saudi Arabia — less than a year after the murder of journalist Jamal Khashoggi — and is now the biggest outside investor in the state-owned oil giant Saudi Aramco.

As BlackRock’s index funds comprise most of its assets, the firm will continue to hold stocks in polluting companies for years. Nevertheless, Fink said it will offer more options to investors — particularly millennials — who want to exclude fossil-fuel companies from their portfolios.

“Young people have been at the forefront of calling on institutions — including BlackRock — to address the new challenges associated with climate change,” Fink wrote. “They are asking more of companies and of governments, in both transparency and in action.”

When it comes to investing, going green has clearly demonstrated benefits — whether you care about the environment or not. Over the past decade, companies in the S&P 500 energy sector were up just 2 percent. By comparison, the broader S&P 500 has nearly tripled.

Fink’s Tuesday letter came almost exactly a year after Fink got spoofed by pranksters who blasted out a fake letter claiming BlackRock within five years would sell 90 percent of stocks in companies that weren’t compliant with the 2015 Paris Agreement — the global climate pact that President Trump exited in 2018.

On Tuesday, Fink made no such demand, but called on companies to publish plans for how they will operate if world leaders achieve the goals outlined in the Paris accord, which calls for limiting global warming to less than 2 degrees Celsius.