Risk BlackRock CEO: Climate Change is Causing a 'Fundamental Reshaping of Finance'

Andrew Cummings
January 17, 2020

BlackRock, the world's largest asset manager with almost $7 trillion in client assets, is set to place sustainability at the center of its investment approach.

BlackRock, Inc.is a massive asset manager in charge of approximately United States dollars 7 trillion, who made helping more and more people experiencing financial well-being its objective.

BlackRock's iShares-branded ETFs took in US$75.20 billion of new money, up from US$41.50 billion in the prior quarter, taking the net inflow for the year to US$183 billion.

Mr. Fink wrote: "Over time, companies and countries that do not respond to stakeholders and do not address sustainability risks will face growing skepticism from the markets and, in turn, at a higher cost of capital".

Maybe, or maybe this is more about the fact that "Climate change is nearly invariably the top issue that clients around the world raise with BlackRock", and he feels the need to signal that he's doing something. "And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself".

Especially given the emphasis on reporting risk and performance through the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD), both by the end of the year. Chief Executive, Larry Fink said in a post-earnings' call with a press agency reporter earlier on Wednesday (January 15th), "I think it's quite evident from our flows in the fourth quarter that we are winning more of our clients' share of wallet".

This approach to investing comes after a yearslong evolution for the industry, which began with simple funds that bluntly excluded stocks deemed as harmful, such as gun makers or tobacco stocks. "Companies, investors, and governments must prepare for a significant reallocation of capital", he said.

Even as new reports yesterday from NASA and the British weather service showed climate change had created the hottest decade in history, according to the traditional rules of capitalism, if companies make fortunes from digging coal and building pipelines, then nothing is going to stop them. Direct investments make up around $1.7 trillion (€1.53 trillion) of Blackrock's $7 trillion holdings.

Part of that plan would allow clients to select funds that do not include certain companies and sectors, including a "fossil fuel screen".

The change to BlackRock is substantial. He adds, "The evidence on climate risk is compelling investors to reassess core assumptions about modern finance".

The company has faced protests, including outside its Munich headquarters, and an appeal from Greens leader Richard Di Natale to walk away from the Adani project. Real results for investors, the economy and the planet hinge on how ambitiously and transparently BlackRock uses its capital and influence to accelerate climate progress and policy - and whether other leading asset managers do the same.

As the NYT notes, "Because of its sheer size, BlackRock will remain one of the world's largest investors in fossil-fuel companies".

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