Nadine Viel Lamare
When BlackRock sneezes, the high carbon economy catches cold. That at least is the hope sparked by the news last month that the world’s largest asset manager had signed up to the Climate Action 100+ initiative as part of its intention to “place sustainability at the centre of our investment approach”.
In two letters, to shareholders and to clients, BlackRock CEO Larry Fink asserted the belief not only that anthropogenic climate is happening but that the financial sector must and will undergo significant structural change to meet this challenge. Naturally, if financial markets are going to change, with the transition to a low carbon economy at the heart of this transformation, it is BlackRock’s fiduciary duty to ensure its investors are best placed to benefit from this.
Since 2020 is likely to be a critical point in averting the worst excesses of climate change, this news is very welcome. In the build-up to COP26 this November, five years since the Paris Agreement set a goal of limiting global warming to 1.5 degrees, action is urgently needed.
CA100+ becomes biggest game in town
The addition of BlackRock to its investor signatories has reinforced the idea CA100+ is now the most important global shareholder engagement initiative on climate.
CA100+ is an investor initiative that coordinates engagement with the world’s largest greenhouse gas emitters. Signatories commit to working with the 100 systemically important emitters that account for two-thirds of annual global industrial emissions, alongside more than 60 others with a significant opportunity to drive the clean energy transition.
TPI is a key partner of CA100+, providing data to help CA100+ members accurately assesses whether high-emitting companies are aligning with a path to achieving the Paris Agreement. And to use this data as a basis for engagement.
For example through our partnership with CA100+, TPI directly supported the engagement with Royal Dutch Shell in 2018 that resulted in the firm’s commitment to set long-term emissions reduction targets, including Scope 3 emissions (indirect emissions in the value chain). In its
joint statement between Shell and Climate Action 100+ investors, the company cited that it will continue to work with TPI as way to assess progress.
Nudge power
There is much still to do.
TPI’s State of Transition report last year found that only 1 in 8 companies (12.5%) in the highest emitting sectors are reducing carbon emissions at the rate required to keep global warming below 2°C.
But BlackRock’s announcement will help in this challenge. Although just a fraction of BlackRock’s $7 trillion is subject to discretionary investment decisions, it has significant ‘nudge’ power to encourage investors, for example, to reallocate from the conventional index funds to the sustainable index funds it intends to launch. Funds that may choose to use TPI data to inform them.
As an index manager, BlackRock will continue to be a major shareholder in many significant greenhouse gas emitters, including those who have stubbornly refused to engage with the reality of the climate catastrophe. Indeed BlackRock itself has previously been criticised for opposing shareholder motions calling for more disclosure on emissions and transition planning.
BlackRock’s declaration of intent is very welcome and in signing up to CA100+, BlackRock is committing to a new level of engagement for itself. Although many commentators have noted the wording in Mr Fink’s letter only says “we will be increasingly disposed” to vote against management and board directors not making sufficient progress on sustainability-related disclosures and practices.
The announcement can certainly embolden CA100+ in its work. We face a challenging future, but with the world’s biggest asset manager moving in the right direction, we have a better chance of aligning the global economy with a world that remains below 2°C of warming.
