BlackRock to ease off coal
The world's largest fund manager says it will reduce its exposure to thermal coal.
BlackRock - a firm that controls nearly $US7 trillion in funds - has revealed a policy shift in letters published on its website.
BlackRock chief Larry Fink says climate change has now become a factor in many companies’ long-term prospects.
“I believe we are on the edge of a fundamental reshaping of finance,” Mr Fink wrote.
“Investors are increasingly reckoning with these questions and [recognising] that climate risk is investment risk.
“In the near future — and sooner than most anticipate — there will be a significant reallocation of capital.”
BlackRock will soon require companies to improve their financial disclosure to shareholders in relation to climate risks and sustainability.
“In the absence of robust disclosures, investors, including BlackRock, will increasingly conclude that companies are not adequately managing risk,” Mr Fink wrote.
It will no longer invest in companies that generate more than 25 per cent of their revenue from thermal coal production.
Many of the world's largest miners fall below that threshold — for example, BHP made US$1.55 billion from thermal coal in the 2019 financial year was $US1.55 billion, just 3.5 per cent of its US$44.3 billion total revenue.
The Institute for Energy Economics and Financial Analysis (IEEFA) said it is a “pedestrian and insufficient” effort.
“IEEFA would strongly endorse a move by BlackRock to offer a low emissions index default offering for all investors, both new and existing,” the group said.
Emma Herd from the Investor Group on Climate Change (IGCC), which represents institutional investors with more than $2 trillion in funds under management, said it is still an important message.
“There's no doubt that everybody is looking for more action from across the large corporate entities in every market, but the thing to remember is that this is the largest asset manager in the world loudly saying that they think that climate change is a key risk,” Ms Herd told the ABC.
“I think it would be a very brave company that says that they can disregard the views of $US7 trillion worth of capital, so it sends an incredibly loud signal across markets and I have no doubt companies will be hearing it.”