BlackRock Shakes Up Sustainable Investing Business Following Criticism -- Update
By Dawn Lim and Julie Steinberg
BlackRock Inc. said it would take a tougher stance against
corporations that aren't providing a full accounting of
environmental risks, part of a slew of moves by the investment
giant to show it is doing more to address investment challenges
posed by climate change.
Among the moves, BlackRock said it would be increasingly
disposed to vote against management and boards if companies don't
disclose climate change risks and plans in line with key industry
BlackRock is also pulling back from thermal coal producers in
actively managed debt-and-equity portfolios by mid-2020, a move
that will lead to $500 million in sales. It will expand the range
of sustainable investment products as well as double to 150 the
number of exchange-traded funds that address environmental, social
and governance challenges.
BlackRock is the world's largest asset manager, with about $7
trillion under management. It has risen on the back of index funds
that trade on exchanges and through these funds has extended its
reach across nearly every company and is part of the retirement
accounts of millions of people around the world. The firm also sits
at the backbone of Wall Street as its software is used by banks to
monitor their risks.
The firm said it is putting more focus on sustainability because
the costs of climate change have ramifications on the price of
assets and the financial ecosystem.
"Climate change has become a defining factor in companies'
long-term prospects," BlackRock Chief Executive Laurence Fink said
in his annual letter. "The evidence on climate risk is compelling
investors to reassess core assumptions about modern finance."
The rise of index funds transformed three firms into major
forces in corporate America and thrust them into the public
spotlight. The biggest -- BlackRock, Vanguard and State Street
Corp. -- hold roughly a fifth of the S&P 500 through funds they
run for investors. They can cast critical votes and have the ears
of chief executives. How they exercise this power -- or choose not
too -- has ripple effects across markets.
All three have faced questions over their responsibilities as
shareholders on behalf of investors in funds they run. In years
past, these firms have targeted gender diversity in boardrooms
among other issues.
Lately, there has been increased pressure on them to do more on
BlackRock's offices around the world have been frequented by
activists who blast the firm for being slow to act on green issues.
The firm has debated a question internally: how can BlackRock
ensure it has public support to operate in the countries where it
does business as it continues to grow?
The firm said it would provide more information on data on the
carbon footprint and other potentially controversial holdings in
its mutual funds. It also said it would disclose more details of
its conversations with the companies its funds invest in. BlackRock
also recently said it had joined Climate Action 100+, the world's
largest group of investors by assets pressuring companies to act on
The moves come as regulators are scrutinizing ESG funds across
the asset-management industry in an attempt to determine whether
those claims are at odds with reality.
"Over the next few years, one of the most important questions we
will face is the scale and scope of government action on climate
change, which will generally define the speed with which we move to
a low-carbon economy," Mr. Fink said in his letter.
He added that "while government must lead the way in this
transition, companies and investors also have a meaningful role to
Write to Dawn Lim at firstname.lastname@example.org and Julie Steinberg at
(END) Dow Jones Newswires
January 14, 2020 08:34 ET (13:34 GMT)
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