What can BlackRock really do, given that it works with client money?
Larry Fink has said that climate change is a major threat to clients’ investments, so continuing to support the companies driving climate change makes BlackRock part of that threat. There is an inherent conflict between the long-term survival of companies whose core business model is based on fossil fuels or deforestation and the long-term existence of life as we know it. Continuing to hold fossil fuel companies in a portfolio is an abdication of long-term fiduciary responsibility. Until it pursues action that aims to materially reduce greenhouse gas emissions, BlackRock is trying to have its cake and eat it, too.
If BlackRock stops investing in fossil fuels and other climate-harming companies, will another investor just step in?
Fewer institutional investors are buying energy stocks, and, for many companies, institutional investors are reducing the size of their fossil fuel holdings. The energy transition, in which global economic growth is increasingly decoupled from fossil fuel use, is underway. As energy stocks have become less relevant, other sectors are moving forward.
What more needs to be done on coal now that BlackRock has a coal exclusion policy?
BlackRock is making a lot of noise about excluding coal from funds, yet only a fraction of BlackRock’s more than $9 trillion AUM is currently under its coal exclusion screen. Worse still, the exclusion screen applies to less than 20% of the coal industry. BlackRock must expand the coal screen to cover more of the industry and apply it to all its funds.
If institutional investors stop investing in fossil fuels and other climate-harming industries will private equity just step in?
Private equity is too small to absorb all the fossil fuel equity. According to the latest FSOC report, the entire private equity industry is only around $3.7 trillion, including everything it invests in, or about half of BlackRock’s AUM. It is highly unlikely it could absorb all the fossil fuel assets. Additionally, BlackRock and other asset managers also hold a lot of debt via bond funds. Private equity purchases equity, so it would not buy up the debt if BlackRock were to offload it.