BlackRock Signals a More Aggressive Stand on Climate Action

The financial firepower lined up in favor of climate action took a quantum leap forward last week when the global investor group Climate Action 100+ announced the addition of BlackRock to its roster. BlackRock alone manages $6.8 trillion in assets, and this move boosts the cumulative total of the group past the $41 trillion mark.

That $41 trillion number is especially significant in light of the Donald Trump administration’s proposal to roll back climate-related provisions in NEPA, the National Environmental Policy Act. As justification, the administration claimed the move would stimulate “more than a trillion dollars” in private-sector investment in U.S. infrastructure.

But that’s a drop in the bucket compared to the climate-oriented investment potential under the guidance of Climate Action 100+.

Prioritizing corporate targets for climate action

Climate Action 100+ launched at the One Planet Summit in 2017 with the goal of pressing the world’s largest corporate greenhouse gas emitters to take meaningful action on climate change.

The companies targeted by Climate Action 100+ consists of 100 “systemically important emitters,” which cumulatively account for two-thirds of annual industrial emissions globally. In addition, 61 other members are described as having a “significant opportunity to drive the clean energy transition.”

As may be expected, the focus companies are mainly located in Europe (34.8 percent), North America (33.5 percent), and Asia (19.9 percent). The focus sectors also fall neatly into the expected categories, topped by oil and gas (24.8 percent), utilities and power producers (19.3 percent), transportation (16.1 percent), and mining and metals (14.3 percent).

Together, the 161 focus companies reflect that breakdown, with many familiar names in the fossil fuel sector, as well as the energy supply and automotive industries.

The list also demonstrates that companies with fairly impressive track records on clean power still have substantial opportunities for future decarbonization. Coca-Cola, Unilever and Walmart, for example, are all in the group of 61 additional companies that observers say have room to improve.

Climate Action 100+ pushes back on NEPA rollback

In what appears to be a coincidence of timing, Climate Action 100+ announced the addition of BlackRock on January 9, the same day President Trump formally proposed rolling back climate-related provisions in NEPA.

Coincidental though it may be, the Climate Action 100+ announcement reads like a direct rebuke of the NEPA proposal.

“Company boards should be under no illusion of the need to take action on climate change and reduce their emissions,” Stephanie Pfeifer, member of the Climate Action 100+ steering committee and CEO of the Institutional Investors Group on Climate Change, said in a press statement.

“BlackRock joins over 370 other investors already involved in the initiative putting pressure on companies to commit to a net-zero future and address climate risks,” she added.

BlackRock raises the bar on climate action

As the world’s single largest asset manager, BlackRock wields an outsized influence on the ability of private-sector influencers to accelerate action on climate change. The company’s $6.8 trillion in assets under management surpasses the GDP of every nation on Earth, with the exception of the U.S. ($22.3 trillion) and China ($15.2 trillion).

Climate Action 100+ bases its member commitment on the 2014-2015 Global Investor Statement on Climate Change, a document that aligns with the goals of the 2015 Paris climate agreement.

With its commitment to Climate Action 100+, BlackRock says it will press boards and senior management to create a corporate governance framework based on disclosure and accountability regarding greenhouse gas emissions, as well as climate change risks and opportunities.

New direction for BlackRock, new hope for quashing the NEPA rollback

That certainly does not sound like an open call for companies to pursue infrastructure projects in the U.S. willy-nilly without regard for climate impacts, as envisioned by the proposed NEPA rollback.

Indeed, in his newly issued annual letter to corporate executives, BlackRock CEO Larry Fink wrote that “climate change has become a defining factor in companies’ long-term prospects.”

“Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk,” he added.

In direct opposition to the justification for the proposed NEPA rollback, Fink emphasized the need to build climate resiliency into infrastructure projects.

He also said he plans to deploy BlackRock’s voting power in the effort: “Where we feel companies and boards are not producing effective sustainability disclosures or implementing frameworks for managing these issues, we will hold board members accountable."

What’s next for BlackRock

Fink pledged that BlackRock would stop holding shares in companies with more than 25 percent of their revenue in thermal coal, while substantially expanding its roster of sustainability-oriented investments.

Although the new investment plan only covers assets under active management, it has game-changing potential. BlackRock has been previously cited for losses related to fossil fuel companies in its passive fund holdings, but the new plan could ripple out to hit those companies as well.

Signs of change in the passive sphere are already apparent. According to one study issued last summer, just four companies — ExxonMobil, Chevron, Royal Dutch Shell and BP — accounted for three-quarters of BlackRock's losses related to passive funds over a 10-year period.

ExxonMobil is still vigorously resisting change and Chevron is still reaching for a plan, but Royal Dutch Shell and BP have already made substantial efforts to diversify into renewable energy, electric vehicles and other clean technologies.

Image credit: Thomas Hawk/Flickr