Asset managers have a choice in the companies that stay in their portfolio.
Earlier this month, the Institute for Energy Economics and Financial Analysis released a new report slamming BlackRock’s high exposure to fossil fuels in its investment products. Among other key findings, the report concludes that BlackRock’s failure to adequately address fossil fuel sector under-performance has lost investors over US$90 billion in estimated value destruction and opportunity cost from a select few holdings over the past decade.
BlackRock shot back a handful of predictable responses and the report garnered some critique, mostly centering around the inability of BlackRock to adjust, amend, or alter their index-based investment portfolios.
This very issue has been at the center of a number of academic papers, including this and this, which argue that asset managers, not just index providers, have not only a choice in what companies ultimately stay within their portfolio, but also a responsibility towards long-term investor interest.
European based asset managers have also managed to find a way of removing the worst fossil fuels from their indexes without breaking their business model.
If BlackRock wants to not be remembered as the world’s biggest backer of the climate emergency, which more and more groups and people are starting to see, it’s going to have to try a lot harder than this.
This issue was also discussed on the following finance TV show: