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Asset manager BlackRock threatens to sell shares in worst climate polluters

Jasper Jolly
·3-min read
<span>Photograph: Ralph Orlowski/Reuters</span>
Photograph: Ralph Orlowski/Reuters

BlackRock has said it will threaten to sell its shares in the worst corporate polluters, as the world’s largest asset manager pledged to support the goal of net zero carbon dioxide emissions by 2050.

Larry Fink, BlackRock’s chief executive, said the coronavirus pandemic had increased focus on existential climate risks, in his annual letter to chief executives around the world.

BlackRock has significant influence with companies, investors and governments because of the vast array of shares, bonds and other assets its controls, worth $8.7tn (£6.4tn) at the end of September.

Fink said the coronavirus pandemic had increased the focus on the climate crisis among investors.

“I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives,” he wrote.

“No issue ranks higher than climate change on our clients’ lists of priorities.”

BlackRock has faced significant pressure from environmental activists to improve its record on climate action, given its role as the biggest controller of shares and bonds in the world, including vast holdings of fossil fuel companies.

The pledge to support net zero by 2050 brings BlackRock in line with commitments by more than 100 countries around the world, and with some of its big rivals which have already vowed not to invest in companies that pollute by 2050.

Part of BlackRock’s pledge will mean taking a more muscular role in its dealings with the companies whose shares it holds, including an increased willingness to vote against boards and in favour of climate resolutions and the “potential exit” from companies who do not try to improve. It will focus its efforts on 1,000 companies – up from 440 during 2020 – who together account for 90% of emissions from BlackRock’s portfolio.

The asset manager last year pledged to divest from companies who made more than 25% of their revenues from thermal coal, but the latest decision to threaten further divestments represents a stronger signal particularly to oil and gas extractors who do not have a plan for net zero emissions.

However, the company will retain vast holdings in fossil fuel companies because of its role in providing funds that passively track investment indices, about 90% of its holdings. Even after the thermal coal pledge BlackRock owns assets worth $85bn in coal-producing companies.

BlackRock says it is not its role to force its clients to divest from fossil fuel producers, but it argues that it is making it easier for clients such as pension funds and university endowments to choose environmentally friendly investments rather than support polluters. These included new measures showing “temperature alignment” scores for equity and bond funds, further adding climate risks into its investment processes and launching new funds aligned with the net zero goal.