BlackRock arrives fashionably late to sustainable portfolios

January 16, 2020, 11:48 AM UTC
BlackRock CEO Larry Fink
Larry Fink, chief executive officer of BlackRock Inc., gestures as he speaks ahead of a Bloomberg Television interview at the Blackrock Inc. wealth symposium in Zurich, Switzerland, on Thursday, March 7, 2019. Policy mistakes such as a hard Brexit pose the greatest risk amid a synchronized global slowdown, according to Blackrock Vice President Philipp Hildebrand. Photographer: Stefan Wermuth/Bloomberg via Getty Images
Stefan Wermuth—Bloomberg/Getty Images

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Good morning. 

“Climate risk is investment risk,” BlackRock CEO Larry Fink wrote in his annual letter to CEOs this week, noting that climate change was forcing financiers to reconsider their “core assumptions” about modern finance.

To that end, BlackRock—the world’s largest asset manager—is making some changes to its portfolio. Companies that generate more than 25% of revenue from coal will be removed from the group’s actively managed funds.  

However, as Fortune’s Alan Murray noted in CEO Daily yesterday, the majority of BlackRock’s funds are passively managed, so expect BlackRock to continue investing in fossil fuels for some time to come.  

Nevertheless, divestment is catching. It was only last month that Goldman Sachs CEO David Solomon announced the bank would not fund future Arctic oil projects nor any thermal coal projects and Fink warns that in the near future, “sooner than most anticipate,” there will be a significant reallocation of capital. 

MSCI, the financial tool provider and index maker, seems to agree. In the group’s 2020 ESG Trends to Watch report released this month, MSCI argues that increasingly capital will be tied to ESG performance. The trend is already on the rise. According to MSCI, ESG-linked loans more than doubled to $71.3 billion in the first three quarters of 2019 over the same period in 2018. 

MSCI also predicts that stakeholder activism will become more prominent in the year ahead, but notes that only shareholders have formal mechanisms to hold companies directly to account. Here Fink is on trend again, writing in his letter that BlackRock won’t shy away from using its shareholder clout to pressure companies into conforming to ESG standards.  

BlackRock has historically fallen short on this point. According to non-profit Majority Action, last year BlackRock supported only 12% of shareholder resolutions addressing climate change. Jackie Cook, director of sustainable stewardship research at Morningstar, estimates an additional 15 sustainability-related resolutions would have passed last year if BlackRock had offered its support.  

No surprise then that, while skepticism that Fink will follow through remains, many commentators are in favor of BlakRock’s about face. Environmental Defense Fund president Fred Krupp gushed that Fink has “redefined what it means to lead on climate change in the finance sector,” suggesting that Fink’s letter might prove to be a “historic” moment. 

Others were more reserved in their praise. Kirsten Snow Spalding, senior department director at Ceres Investor Network said, “BlackRock is now throwing their weight behind what already exists — a global movement to really addressing sustainability in portfolios…They’re not the first to the party, but just adding their weight is critical.” 

More below, 

Eamon Barrett 


Under fire 

Australian PM Scott Morrison called for a government inquiry into the administration’s response to the wildfires that have raged across the country for months, but he stopped short of pledging policy changes that could further reduce carbon emissions. “The emissions reduction action of any one country anywhere in the world is not going to specifically stop or start one fire event, but what the climate resilience and adaptation work can do within a country can very much directly ensure that Australians are better protected against what this reality is in the future,” Morrison said. The Guardian 


Climate trade-offs 

The U.S. Senate is due to vote on the United States-Mexico-Canada Agreement (USMCA) later today, after the bill that would turn the NAFTA-replacement into law advanced through several committees on Tuesday. The bill is expected to pass, but a few Democrats voted against its advancement on the grounds that the USMCA has zero safeguards against climate change. The USMCA is a trade deal that will hinder progress on climate action for a generation. This is a profound environmental and climate failure,” said Massachusetts Senator Edward Markey, who voted against the bill’s advance. Politico 


India boos Bezos 

India’s antitrust regulator opened an investigation into Amazon on Monday, days before Bezos in the country to attend an Amazon summit on SMEs in New Delhi. The Amazon CEO pledged $1 billion to help digitize local industries, but was met with protests from SMEs who accuse the e-commerce giant of “economic terrorism,” as small retailers can’t compete with Amazon’s low prices. New York Times 


Bezos battles deniers  

Iother but related Bezos news, the CEO took a stand against climate change deniers while in India, telling an audience of SMEs: “Anybody today who is not acknowledging that climate change is real — that we humans are affecting this planet in a very significant and dangerous way — those people are not being reasonable.” Bezos’ proclamation comes the week after reports alleged Amazon had threatened to fire two employees for publicly criticizing the company’s climate policies. CNBC 


Elizabeth Warren: I’ll use the force of government to make tech work for people with disabilities by Elizabeth Warren 

No more ‘chicken or fish?’ on wedding invites. Now on the menu: Plant-based entrées by Stephanie Cain 

Forget policymakers. Greta Thunberg and her allies are targeting CEOs now by Christiaan Hetzner  

‘They must scale up:’ Greenpeace ranks China’s tech giants on renewable energy by Naomi Xu Elegant 

Retailers reuse and recycle the way to increased growth by Kevin Kelleher 


Akon attends Web Summit 2019

Some news from the bizarre: American R&B singer Akon—of Lonely and Smack That fame—has bought a city in his country of birth, Sengal, which he hopes to develop as a destination for eco-tourism. The smartly-named Akon City will be built on a 2,000 acre patch of land close to the new airport in Senegal’s capital, Dakar.  

It’s news to me but, the multi-platinum R&B star from the early noughties has a number of philanthropic efforts in Africa. Akon City will be powered by renewable energy provided by Akon’s solar-power initiative, Akon Lighting Africa, and the city’s economy will run on Akon’s own cryptocurrency called—wait for it—Akoin. 

“If it works, we will scale it out to all the other countries in Africa so all the cities are connected. It’s going to be a 50-to-100-year project, most likely. I probably won’t even live to see it finished. But for the project in Senegal, we have a 10-year deadline for that city to be built out,” Akon told Newsweek in 2018. 

Akon signed an MOU with the Senegalese tourism ministry on the city this week and will be built over the next ten years. 

(Photo By Eóin Noonan/Sportsfile for Web Summit via Getty Images) 


250-360 million

That's the number of people who could be living in an area where there's a likelihood of experiencing a lethal heatwave by 2030 if carbon levels continue to rise unabated, according to McKinsey. The consultancy released a report on the physical and socioeconomic hazards of climate change this morning, covering topics such as exposure to heat, flooding, drought and starvation. It's full of interesting, often troubling, stats. For example, The share of annual outdoor working hours lost due to extreme heat and humidity in exposed regions would double from 10 percent today to 15 to 20 percent by 2050.

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