BlackRock Inc is the world’s largest investment management company. It is headquartered in New York City, handling nearly seven trillion dollars in assets.
BlackRock is about to move away from investment in fossil fuels.
Bill McKibben notes, in a piece in the New Yorker, “If you felt the earth tremble a little bit in Manhattan on Tuesday morning, it was likely caused by the sheer heft of vast amounts of money starting to shift. “Seismic” is the only word to describe the recent decision of the asset-management firm BlackRock to acknowledge the urgency of the climate crisis and begin (emphasis on begin) to start redirecting its investments…By one estimate, there’s about eighty trillion dollars of money on the planet. If that’s correct, then BlackRock’s holding of seven trillion dollars means that nearly a dime of every dollar rests in its digital files, mostly in the form of stocks it invests in for pension funds and the like. So when BlackRock’s C.E.O., Larry Fink, devoted his annual letter to investors to explaining that climate change has now put us “on the edge of a fundamental reshaping of finance,” it marked a watershed moment in climate history.”
It is not a full-on divestment. For that matter, this might be greenwashing as much as anything else. But a major player in the financial market has declared fossil fuel and related investments risky because of the environmental damage they induce, because that damage is to be mitigated, and thus, assets are to be stranded. More or less. For example with respect to “Exiting Thermal Coal Producers” BlackRock says,
Thermal coal production is one such sector. Thermal coal is significantly carbon intensive, becoming less and less economically viable, and highly exposed to regulation because of its environmental impacts. With the acceleration of the global energy transition, we do not believe that the long-term economic or investment rationale justifies continued investment in this sector. As a result, we are in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25% of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020. As part of our process of evaluating sectors with high ESG risk, we will also closely scrutinize other businesses that are heavily reliant on thermal coal as an input, in order to understand whether they are effectively transitioning away from this reliance. In addition, BlackRock’s alternatives business will make no future direct investments in companies that generate more than 25% of their revenues from thermal coal production.
McKibben agrees that this is that this change is not as powerful as it needs to be, noting that :BlackRock’s actual policy changes are modest compared with Fink’s rhetoric. At least at first, the main change will be to rid the firm’s actively managed portfolio (about $1.8 trillion in value) of coal stocks; but coal, though still a major contributor to climate change, is already on the wane, except in Asia. The companies that mine it have tanked in value—even Donald Trump’s coddling has been unable to slow the industry’s decline in this country. So an investor swearing off coal is a bit like cutting cake out of your diet but clinging to a slice of pie and a box of doughnuts.”
BlackRock is not to be congratulated here. This is not enough, and for much of the damage done, it is too late. The barn-door closers at BlackRock are still liable for being among the entrenched power and money brokers that have destroyed this planet for the future. This action will help the rest of us to rebuild our world a few decades sooner, and it may help some of them survive the turnover that has to happen eventually. In short, if you are an activist working toward divestment, know that your work is just starting, but now you have a new tool to use in convincing the complacent that there is a problem, and a partial solution.
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