Fund manager signals change, but can it be believed?

January 23, 2020
A protest against BlackRock in San Francisco on May 23.
A protest against BlackRock in San Francisco, United States, on May 23. Photo: CODEPINK

Larry Fink, CEO of the world’s biggest fund manager BlackRock, made a pitch on January 14 for a “more sustainable and inclusive capitalism” because of the threat posed by global climate change. Fink’s company controls US$7 trillion in investments.

“Young people have been at the forefront of calling on institutions — including BlackRock — to address the new challenges associated with climate change”, he said, adding that as “trillions of dollars shift to millennials” as they become CEOs, policymakers and heads of state, “they will further reshape the world’s approach to sustainability”.

Fink is publicly expressing the pressure many corporations are discussing privately. They also know that millennials are not the only ones wanting corporations to shift funding away from fossil fuels.

BlackRock holds a 6.7% stake in Exxon Mobil, 6.9% in Chevron and 6% in mining company Glencore. BlackRock and investment firm Vanguard have opposed more than 80% of climate change-related motions at fossil fuel companies between 2015 and 2019, according to ProxyInsight.

These investments in coal, oil and gas have made it the focus of a United States climate movement campaign. The Stop the Money Pipeline coalition, comprising climate, youth and Indigenous organisations, is calling on banks, insurance companies and asset managers, including BlackRock, to stop financing fossil fuels and deforestation.

A special report by The Guardian last November revealed the thermal coal, oil and gas reserve holdings of the world’s three largest money managers, including BlackRock, had risen by 34.8% since 2016. It also found that the largest institutional investors in oil, gas and coal companies frequently used their vote to oppose efforts to make climate-related financial transactions transparent.

In an interview on PBS Newshour, screened on SBS on January 18, a BlackRock company executive acknowledged BlackRock was feeling the pressure. But US climate change activists said while they were happy to hear that, they wanted action not words. They also said Fink’s speech left many questions unanswered.

Amazon Watch campaigner Moira Birss said BlackRock’s announcement did not indicate if it would stop investing in fossil fuel companies. She called on Fink to push the agricultural companies it invests in, such as Brazilian beef giant JBS, to operate sustainably.

“Will deforestation risk be a part of its new engagement and voting priorities? What about Indigenous rights? The Amazon fires last fall and the wildfires in Australia today show the immense risk to the climate, forests and indigenous peoples that deforestation-risk commodities pose”, she asked.

Sierra Club spokesperson Ben Cushing said: “The financial giants propping up the industries driving us towards climate disaster can no longer escape public scrutiny. BlackRock’s announcement today is … testament to the power of public pressure calling for climate action. But BlackRock will continue to be the world’s largest investor in coal, oil, and gas. It is time to turn off the money pipeline to dirty fossil fuels for good.”

The Sunrise Project spokesperson Diana Best was more inclined to believe Fink, saying its divestment of coal in its actively managed funds “is a fantastic start” that will “raise the bar for competitors”. The Sunrise Project is a supporter of the BlackRock’s Big Problem campaign to encourage it to divest from all fossil fuels.

Fink described the BlackRock announcement as the start of a “period of significant capital reallocation”. He said those companies and countries that do not “address sustainability risks will encounter growing scepticism from the markets”. 

A test of this commitment will come shortly. On February 5, Siemans will hold its Annual General Meeting in Munich, which is where BlackRock, a major investor in Siemans, will have an opportunity to quash the contract to install signalling systems for the controversial Adani-Carmichael rail link project in Queensland.

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