LONDON / BOSTON (Reuters) – BlackRock (BLK.N) The CEO, Larry Fink, warned the company’s board of directors to intensify efforts to address climate change, a significant change by the world’s leading asset manager, as it faces growing concerns about its fossil fuel investments .
In his annual letter to the CEO published on the company’s website on Tuesday, Fink predicted a “fundamental remodeling of finances” and said that companies must act or face the anger of investors on how unsustainable business practices could curb Your future wealth.
Fink also said BlackRock would be “increasingly willing” to cast critical power votes linked to sustainability, and said in a separate letter to customers that the company will be sold in mid-2020 of its actively managed client portfolio holdings. in companies that obtain more than 25% of their income comes from the production of thermal coal.
Climate activists praised Fink’s renewed positions and said they would pressure his rivals, although some warned that the New York-based asset manager should still support his new rhetoric.
“As the largest financial institution in the world, BlackRock’s announcement today is an important step in the right direction and a testament to the power of public pressure that calls for climate action,” said Ben Cushing of the US-based environmental group United Sierra Club, in A statement by email.
A change in global investment trends has sent billions of dollars to passive funds managed by BlackRock and its rivals Vanguard Group and State Street Corp, (STT.N) providing the three powerful leverages to the main corporations.
A spokeswoman for Vanguard said the firm aims to address climate change “while adhering to our obligations to deliver long-term value to our fund holders.” State Street did not immediately respond to requests for comment.
The three companies have clients with a wide range of political views and tried to represent their actions in terms of investment strategy rather than politics.
The majority leader of the Montana Senate, Fred Thomas, a Republican and legislative liaison with the Montana Investment Board, for which BlackRock manages assets, said he supports the use of many fuel sources, including coal, and that BlackRock must distrust calls to get away from fossil fuels. .
“Any effort in my opinion to try to placate this environmental agenda just to get along and get along is a bad decision for any business,” said Thomas.
OUT BEHIND THE SCENES
An analysis by Reuters in October found that leading indexed fund managers rarely challenge the company’s management and have largely opposed proposals on climate change. In 2018 and 2019, BlackRock and Vanguard only supported about 10% of the shareholders’ resolutions related to the climate.
Historically, BlackRock has said it puts corporate executives behind the scenes, an approach that critics say undermines other reform efforts.
In Exxon Mobil’s (XOM.N) Annual meeting on May 29, for example, BlackRock supported the election of all but one of the 10 directors and opposed all but one of the seven shareholder proposals, the revelations show.
Fink said Tuesday that BlackRock would disseminate its votes by power quarterly and give further explanations about high-profile decisions.
In an interview, Robert Jackson, a member of the US Securities and Exchange Commission. UU., He said he was “excited” with the step as a way to create more responsibility for the votes.
Investors have begun to invest their money in more climate-friendly funds, although the overall size of the action is still small. New deposits in sustainable funds grew to $ 20 billion in 2019, according to Morningstar data, almost four times the record of the previous year.
BlackRock has promised a greater focus on climate problems in the past, but disappointed activists. The company did not make Fink or other executives available for comment.
In an interview with CNBC, Fink said: “More and more clients are looking for a more sustainable portfolio” and reiterated that companies should make more disclosures such as those promoted by the Sustainability Accounting Standards Board.
BlackRock did not give specific details about the companies it could divest or the size of those positions, and Fink wrote that BlackRock “will continue to maintain exposure to the hydrocarbon economy.” Historically, even the main US coal producers. UU. They represent only a small fraction of BlackRock’s assets holding funds.
For example, as of May 31, the $ 861 million BlackRock Advantage Small Cap Core basic fund (BDSAX.O) held 29,965 shares of Arch Coal worth $ 2.64 million.
Banks have also faced pressures to cut fossil fuel financing. Last week, a group of institutional investors in Barclays (BARC.L) presented a resolution calling for it to stop financing companies that were not aligned with the Paris climate agreement.
Seb Beloe, a WHEB Asset Management partner in London, focused on sustainability, said the new BlackRock booth will be useful to pressure companies to think about how they could operate under the objectives of the Paris Agreement to limit global warming.
“That is exactly what we need companies to think carefully, in terms of how to contribute to the rapid deployment of solutions and make their assets more resilient,” he said.
Reports of Sinead Cruise and Lawrence White in London, and of Ross Kerber and Tim McLaughlin in Boston; Additional reports by John McCrank in Washington. Edition of Iain Withers / Mark Potter / Emelia Sithole-Matarise / Jane Merriman / Steve Orlofsky