Insights

A Week in Impact: BlackRock's stake in the ground

Does BlackRock's watershed CEO letter suggest the finance industry is finally taking climate risk seriously?

View from the top

🌍 BlackRock yesterday announced a raft of sweeping changes in an effort to position itself as a global leader in sustainable investing.

🌱 The EU has unveiled a €1trn investment plan to fight climate change, putting it on track to becoming the first carbon-neutral continent by 2050.

💸 Sustainable funds attracted new assets of $20.6bn in 2019, according to Morningstar. Thats four times as much as in 2018 and shatters previous records.

🗞️ The FT reports that the gulf has widened between Fed and ECB approaches to climate change, as pressure mounts on central banks to take action.

BlackRock's stake in the ground

On Tuesday, BlackRock announced plans to put sustainability at the heart of its investment strategy. 

Writing to clients, CEO Larry Fink said BlackRock—which manages $7trn in assets—would now consider ESG risk “with the same rigor that it analyzes traditional measures such as credit and liquidity risk.”

The letter outlines a number of sweeping changes at the world’s largest fund manager, including plans to double the number of sustainability-focused ETFs to 150 and cut companies that derive a quarter or more of their revenues from thermal coal from its actively managed portfolios. The company hopes to increase sustainable assets tenfold from $90bn today to $trn by 2030. 

The letter was released in tandem with Fink’s annual letter to chief executives, in which he said he believed we’re “on the edge of a fundamental reshaping of finance and warned climate change represented an unprecedented investment risk. 

“Climate change is different. Even if only a fraction of the projected impacts is realised, this is a much more structural, long-term crisis. Companies, investors, and governments must prepare for a significant reallocation of capital.”

Historically, Fink’s CEO letters have been met with some cynicism by those who believe the tradition is more an exercise in positive spin than meaningful action. Certainly, BlackRock is no stranger to criticism for its environmental policies, having been repeatedly targeted by climate activists for refusing to divest from fossil fuel companies or using its shareholder clout to combat climate change. 

But yesterday’s statements were different. The stark change in tone is symptomatic of a broader shift among asset managers, and will likely galvanise more material action from industry leaders.

After all, writes the FT, “when the manager of $7trn-worth of assets speaks, it pays to listen.”