eResearch | Laurence D. Fink, the founder and CEO of BlackRock, the world’s largest asset manager, sent a letter to the CEOs of its invested companies and a letter to its clients, addressing a focused mandate on sustainable investing.
BlackRock sees climate risk as investment risk and plans to act ahead of the serious impacts of climate change by doubling its number of Environmental, Social, and Governance (“ESG”) funds to 150 and asking vested companies to follow Task Force on Climate-related Financial Disclosures (“TFCD”) and Sustainability Accounting Standards Board (“SASB”) disclosure guidelines.
Below is a brief summary of the two letters sent by BlackRock:
Letter to CEOs
- BlackRock, in an effort to lead the path for sustainability, became a founding member of the TFCD, signed the UN’s Principles for Responsible Investment, and signed the Vatican’s 2019 statement advocating carbon pricing regimes.
- BlackRock has also joined France and Germany to create the Climate Finance Partnership, a public-private organization with goals to improve financing mechanisms for sustainable infrastructure investments.
- BlackRock believes that the SASB has developed a coherent standard to regulate how companies report information regarding sustainability, and as a method of accountability, BlackRock asks its network of companies to:
- Publish a disclosure in line with industry-specific SASB guidelines by year-end, or disclose a similar set of data in a way that is relevant to your particular business
- Disclose climate-related risks in line with the TCFD’s recommendations
- Link to complete CEO letter: https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
Letter to Clients
- BlackRock is focusing on sustainability for their standard investment solutions and will start to offer ESG versions of flagship model portfolios and ETFs, and plans to double the number of ESG ETF offerings to 150 funds.
- BlackRock plans to reduce its exposure to ESG risk adverse assets such as thermal coal producing and hydrocarbon utilizing companies.
- BlackRock develops and utilizes proprietary tools to measure ESG risks, such as its Carbon Beta tool which allows stress-tests for issuers and portfolios of different carbon pricings.
- BlackRock plans to enhance transparency of its products for sustainability through providing public data on ESG risk factors in addition to asking vested companies to start reporting SASB- and TCFD-aligned disclosures.
- Link to complete Client letter: Link to complete CEO letter: https://www.blackrock.com/corporate/investor-relations/blackrock-client-letter
As leaders such as BlackRock try to influence change in anticipation of negative socioeconomic effects from climate change, it will be interesting to see if companies follow their mandate.
BlackRock stated at the end of the CEO letter, “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”. Last year, BlackRock voted against or withheld votes against 4,800 directors at 2,700 companies.
Nevertheless, the economy’s transition to sustainability is a long-term process and could take decades as technology is still not advanced enough to replace certain core fuels such as hydrocarbons.
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BlackRock (NYSE: BLK)
- blackrock.com
- Headquartered in New York, United States, BlackRock is a publicly-owned global investment manager.
- BlackRock is the world’s largest asset manager, with $6.96 trillion in assets under management as of September 2019.
- BlackRock offers a range of financial and investment solutions to charities, companies, endowments, financial professionals, foundations, governments, individuals, institutions, public institutions, sovereign wealth funds, and unions.
- BlackRock is currently trading at $537.04 with a market cap of $83.4 billion.
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