BlackRock, the world’s largest asset manager, with more than $7 trillion in assets under management in 2020 announced that it would not invest any longer in projects with “high sustainability” risks.

 

In more concrete terms,  Larry Fink, the CEO of BlackRock, said in a public letter that his company is going to assess ESG (environmental, social and governance) metrics “with the same rigor as traditional measures such as liquidity and credit risk”. He and his company seem to be perfectly aware of the threat of climate change and its impact. This pledge includes a shift in its investment policies. For instance, Blackrock commits to cut companies that generate 25% of their revenues or more from thermal coal from its actively managed portfolio by the middle of 2020.

 

Often criticized for its doubtful influence but also for its inactivity, BlackRock’s pledge emanates from a current context where both people and companies seem to pay more attention to their action regarding its impact on the planet. No one can now say that BlackRock does nothing for the planet, but the issue of the environment in portfolios has now clearly gone mainstream and BlackRock may have been slow to notice the trend but since the strategy emanated from the top of the firm, it could be taken seriously.

 

However, actual pledges might not be significant enough to reshape finance, especially regarding BlackRock influence. Coal only represents a small percentage of the market capitalization of the energy industry and no commitments have been done concerning the investments linked to oil and gas industries. We can doubt that we will see disinvestment in those sectors since it represents a huge part of Blackrock’s assets.

 

The reshaping of Blackrock’s policy and more globally the “fundamental reshaping” of the financial world that BlackRock CEO’s letter evocates will be slow ones but little steps from such a huge actor means something if those statements are true and not greenwashing related. We must understand that the investment policy of Blackrock remains close to politics and lobbying, and since no widespread solution exist to get rid of oil and gas, the fossil fuel industry has still some beautiful days ahead.

 

 

 

Marko Stanic

Marko Stanic

Vice President

Focus on Markets.