The world seems to be in more turmoil now more than ever with natural disasters happening at a major scale.
Climate change is being blamed for the bushfires in Australia, the floods in Indonesia and the volcanoes in the Philippines.
BlackRock, which is the world’s largest fund manager with $7 trillion in assets, has decided to take a stand in an attempt to make the world better. The company announced this week that it will double the number of sustainability-focused exchange-traded funds it offers to 150.
It also plans to cut down its investments in companies that get their profits from the use of coal. Overall, the company hopes to increase its investments in sustainable assets from the current $90 billion to $1 trillion by the end of this decade.
BlackRock
Climate Change Action
This move came about after it received strong criticism for now using its position as the number one fund manager in the world to influence the climate change debate. The changes to the fund manager’s investment approach were announced on Jan 14 in a letter to clients, alongside CEO Larry Fink’s letter to other chief executives. In the letter, Fink pointed out that climate change was a major danger to the market.
Fink announced that BlackRock will be assessing their future investments with more than the traditional liquidity risk and credit in mind. The company will now consider the environmental and social effects of their investments to ensure that the fund is investing in something that is a net positive to society.
The fund will also be pushing hard for companies to release their climate risk ratings. This will be based on the standard of the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosure (TCFD). Fink warns BlackRock will be taking action against companies that do not take steps to minimise their climate risks.
BlackRock also recently joined the Climate Action 100+ initiative. This is a group of around 370 fund owners and managers that are pushing for more environmentally-friendly shareholder proposals while pushing companies to follow the standards set by the Paris climate agreement.
Increased Environmental Consciousness
The fact that BlackRock has decided to take this step is a big move. It can also mean a shift in the mindset of investors. Instead of focusing only on the bottom line, serious investors will now have to consider environmental factors as an important factor in their financial returns.
