BlackRock, the world’s largest investor, has vowed to ditch stakes which carry a “high sustainability-related risk” – including thermal coal production. The move will ramp up pressure on companies to take aggressive action on climate change.
In separate letters published this week, the New York-based investment giant outlined a future strategy including plans to ensure sustainability is key to risk management and portfolio construction. The fund manager will offer new products to screen out investment in fossil fuels and – as a new member of the Climate Action 100+ investor initiative – will aim to push the managers of major corporations to adhere to Paris climate agreement targets.
In its 2020 letter to CEOs, BlackRock chairman and chief executive Larry Fink said the world is on the cusp of “a fundamental reshaping of finance”. He argued “companies, investors and governments must prepare for a significant reallocation of capital”.
A new approach
Fink noted climate change is a “defining factor” shaping how companies chart future investment plans, forcing investors to significantly reassess risk and asset values. The CEO called for an entirely new approach to global investment, underscored by BlackRock’s push to scale back its $17.5 billion investment in coal.
“The goal cannot be transparency for transparency’s sake,” Fink wrote. “Disclosure should be a means to achieving a more sustainable and inclusive capitalism.”
BlackRock’s global executive committee outlined the company’s precise plans in a separate letter to clients. It said the public securities – debt and equity – of companies which draw more than 25% of annual revenue from thermal coal output are already being removed from its discretionary active investment portfolios. The fund vowed to closely examine other companies which depend heavily on thermal coal as an input and promised not to make any future investments in companies which generate more than 25% of revenue by producing thermal coal.
The global investor said it manages $50 billion of assets which support the energy transition and focuses on investments in companies which minimize waste via circular economy business models. The fund’s BlackRock Real Assets unit – which manages more than $30 billion of assets – has already invested roughly $5.5 billion in more than 5 GW of utility scale solar and wind generation capacity worldwide.
Raw material sourcing
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In July, BlackRock and U.S. conglomerate General Electric announced plans to design, build, own and operate distributed solar and energy storage projects with the fund manager taking an 80% stake in their Distributed Solar Development joint venture. Last month, the investment manager finalized $1 billion of a record $2.5 billion fund dedicated to investment in solar, wind and energy storage projects.
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