Climate change is a serious problem that threatens not just our environment, properties, but our life—our existence on this planet. For years, scientists have been warning about the negative impacts of the changing climate. Some listened, others ignored their warning, and some consider the matter a hoax.
Today, millions of people believe that climate change is real as they are now seeing its impact around the world. Young people are now standing up, speaking out loud and encouraging world leaders, corporations and every person to do something to prevent climate change.
BlackRock, the world’s largest asset manager, is among the companies that responded to the call of millions of people to take action and help mitigate the risks of changing climate.
Climate Changes Becoming Defining Factor in Long-Term Prospects
Larry Fink, the CEO of BlackRock, Inc. (NYSE: BLK) recently announced that the company is reshaping its investment strategy. It will place sustainability and climate risks at the center of its investment approach.
In his annual letter to CEOs, Mr. Fink wrote, “climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect. But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Mr. Fink added that investors are recognizing that “climate risk is investment risk. Climate change has become the top concern raised by BlackRock clients worldwide. Clients are asking how to modify their portfolios as they seek to understand the risks associated with climate change and how climate policy will affect the global economy.
“These questions are driving a profound reassessment of risk and asset values. 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. Sooner than most anticipate – there will be a significant reallocation of capital,” said Mr. Fink.
BlackRock Believes Sustainability Should be New Standard for Investing
In a separate letter to investors, BlackRock said it will exit investments with high sustainability-related risks such as thermal coal producers. It will launch new investment products that screen fossil fuels and strengthen its commitment to sustainability and transparency in its investment management activities.
The asset manager assured clients that it will help them transition and build more resilient portfolios to achieve more stable and higher long-term returns.
BlackRock explained that it is “making sustainability integral” to its strategy “because sustainable investment options have the potential to offer clients a better outcome.” The asset manager emphasized, “we believe that sustainability should be our new standard for investing.”
Meanwhile, Mr. Fink told the New York Times that his decision to focus BlackRock’s investing approach on climate change was strictly business and that “politics isn’t part of this.”
Mr. Fink’s decision prompted Bank of America Corporation (NYSE: BAC) to analyze coal companies and suggested that BlackRock will probably keep its investments in Glencore PLC ADR (OTC Pink: GLCNF), BHP Group (NYSE: BHP), Teck Resources Limited (NYSE: TECK), and Rio Tinto Group, Inc. (NYSE: RIO).
Article By: Marivic Cabural