Laurence D. Fink, the founder and chief executive of BlackRock, announced Tuesday that his firm would make investment decisions with environmental sustainability as a core goal.
BlackRock is the world’s largest asset manager with nearly $7 trillion in investments, and this move will fundamentally shift its investing policy — and could reshape how corporate America does business and put pressure on other large money managers to follow suit.
Mr. Fink’s annual letter to the chief executives of the world’s largest companies is closely watched, and in the 2020 edition he said BlackRock would begin to exit certain investments that “present a high sustainability-related risk,” such as those in coal producers. His intent is to encourage every company, not just energy firms, to rethink their carbon footprints.
“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Mr. Fink wrote in the letter, which was obtained by The New York Times. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”
The firm, he wrote, would also introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability, and press companies to disclose plans “for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized.”
Mr. Fink has not always been the first to address social issues, but his annual letter — such as his dictum two years ago that companies needed to have a purpose beyond profits — has the influence to change the conversations inside boardrooms around the globe.
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And now Mr. Fink is sounding an alarm on a crisis that he believes is the most profound in his 40 years in finance. “Even if only a fraction of the science is right today, this is a much more structural, long-term crisis,” he wrote.
A longtime Democrat, Mr. Fink insisted in an interview that the decision was strictly business. “We are fiduciaries,” he said. “Politics isn’t part of this.”
BlackRock has faced criticism for being behind on pushing environmental issues.
BlackRock itself has come under criticism from both industry and environmental groups for being behind on pushing these issues. Just last month, a British hedge fund manager, Christopher Hohn, said that it was “appalling” of BlackRock not to require companies to disclose their sustainability efforts, and that the firm’s previous efforts had been “full of greenwash.”
Climate activists staged several protests outside BlackRock’s offices last year, and Mr. Fink himself has received letters from members of Congress urging more action on climate-related investing. According to Ceres and FundVotes, a unit of Morningstar, BlackRock had among the worst voting records on climate issues.
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In recent years, many companies and investors have committed to focusing on the environmental impact of business, but none of the largest investors in the country have been willing to make it a central component of their investment strategy.
In that context, Mr. Fink’s move is a watershed — one that could spur a national conversation among financiers and policymakers. However, it’s also possible that some of the most ardent climate activists will see it as falling short.
Even so, the new approach may put pressure on the other large money managers and financial firms in the United States — Vanguard, T. Rowe Price and JPMorgan Chase, among them — to articulate more ambitious strategies around sustainability.
When 631 investors from around the world, representing some $37 trillion in assets, signed a letter last month calling on governments to step up their efforts against climate change, the biggest American firms were conspicuously absent.
BlackRock’s decision may give C.E.O.s license to change their own companies’ strategy and focus more on sustainability, even if doing so cuts into short-term profits. Such a shift could also provide cover for banks and other financial institutions that finance carbon-emitting businesses to change their own policies.
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