Asset manager's new report recognizes significant climate risk but does not sufficiently acknowledge its own contribution to climate change.
This report confirms what we’ve known for years and what was recently highlighted by the San Francisco Federal Reserve: climate change is having financial consequences now on securities, investors are underestimating these impacts, and unless significant changes are made, climate risk will only grow resulting in major instability to our financial system.
While it is necessary to measure the scale of risk from climate impacts, it is insufficient: “portfolio resilience” means that investors must also change their relationship to the companies whose emissions are driving climate change, by either divesting or leveraging shareholder power to align capital with a 1.5C world.
There are a relatively small set of companies driving the bulk of climate pollution, and as more investors increasingly respond to this climate risk, these companies will be at risk for legal action, stranded assets, and lower returns. Investors, including BlackRock, who do not act on this climate risk should expect to end up in court in breach of fiduciary duty.
In this report, BlackRock concludes that “sustainable investing is increasingly a ‘why not’ proposition”. We agree. But BlackRock has a big climate problem and it must overhaul how it defines sustainable investing.
BlackRock is the world’s largest investor in the companies driving climate change: the largest investor in coal, the largest investor in oil and gas, the largest investor in new coal utilities, and one of the largest investors in agro-commodities driving rainforest destruction. Even BlackRock’s marketed “Low Carbon” ESG ETF (CRBN) contains coal mining companies, pipeline companies such as Enbridge and a slew of oil & gas companies.
We have less than 10 years to halt runaway climate change. Investment funds cannot be sustainable if they include fossil fuel companies – the biggest driver of climate change – and the agro-commodity companies driving deforestation, the second-largest driver of greenhouse gas emissions. And if BlackRock truly cares about climate risk, it should make fossil-free portfolios default for all its investors.