BlackRock announced last month it would be placing sustainability at the centre of its investment approach, and a host of measures to go with that.
This came shortly after the news that the $7.4trn (€6.6trn) asset manager had joined Climate Action 100+, an institutional investor initiative to press companies to make changes in response to climate change.
Writing in his 2020 letter to company chief executives, CEO Larry Fink framed BlackRock’s move as a response to an anticipated significant reallocation of capital as investors increasingly recognised climate risk as an investment risk.
“[W]ith the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward,” he wrote.
The asset manager outlined a plethora of moves, including exiting certain thermal coal holdings in active strategies and working with index providers to improve the universe of sustainable indices.
It will also be more transparent about its stewardship activities, and “increasingly predisposed” to vote against management when companies do not meet expectations about sustainability-related disclosures and “the business practices and plans underlying them”. BlackRock has frequently been accused of undermining sustainability efforts by voting against climate change-related shareholder resolutions.
Mark Mansley, CIO at Brunel Pension Partnership, an asset pool for UK local government pension funds with a responsible ownership stance, said: “We are strongly supportive of Larry Fink’s letter as it acknowledges the need for BlackRock to align and assist their clients in managing climate change, the most defining factor – not only for companies – but the planet.
“The substantial shift and commitment to improved transparency will enable us, and clients, to hold them to account and deliver on these most welcome commitments.”
A senior responsible investment officer at a large UK pension investor expressed hope that BlackRock’s move would turn out to be a “tipping point” by putting pressure on other large US asset managers.
Jennifer O’Neill, senior investment consultant at Aon, said it was encouraging that BlackRock had “publicly committed in this way on the serious issues raised by climate change”.
“Wielding real clout through the use of voting rights combined with direct interaction with senior corporate management is a compelling tool,” she added. “We believe BlackRock’s commitment can help to galvanise action to address these challenges.”
At least some activists are sceptical of prospects for change, however.
“While we welcome its commitment to improve transparency of its stewardship activities [….] we might not like what we see when we open the door on these activities,” said Jeanne Martin, campaign manager at ShareAction. “BlackRock’s current voting disclosures on climate issues give little comfort that it will vote in a manner fitting of the climate crisis.”