The scientific consensus is that the threat of catastrophic climate change requires bold and immediate action to reduce emissions across the planet. Major asset managers like BlackRock have a key role to play. Their immense power as shareholders and managers of vast capital influences how companies emit and wean themselves from fossil fuels. While complete change cannot happen overnight, the primary metric for climate action must be the degree to which it drives down global emissions and builds a more just economy.
BlackRock has failed to live up to its rhetoric from January 2020 (a detailed look can be found here). In 2021, it must materially demonstrate it is placing climate at the center of its decision making by taking responsibility for the climate impacts of its entire portfolio and shifting capital out of the industries driving the climate crisis.
There are key steps that can be done quickly:
- Adopting a global baseline climate standard for ESG funds – BlackRock has to ensure that its sustainable funds are truly sustainable. Fossil fuels, forest-risk commodity companies that have not implemented zero-deforestation commitments, and companies that drive catastrophic climate change must be removed from all ESG funds. This can happen immediately.
- Exclude climate harming companies from active funds – BlackRock’s thermal coal exclusion policy covers only a fraction of its business and only 17% of the global coal industry. BlackRock needs to expand its exclusion criteria to incorporate the Global Coal Exit List, and it must expand the policy to exclude tar sands oil and other fossil fuels and climate-harming sectors.
There are steps BlackRock can commit to now with a time bound plan for implementation:
- Expand and strengthen pro-climate engagement and voting; commit to transparent leadership – BlackRock must become more consistent and more transparent about its voting and engagement. Putting companies on warning is not enough without a short and clear timeline before consequences for lack of action kick in. BlackRock must use its shareholder power to move companies towards aligning their business with what the science says is necessary to avoid catastrophic climate change. That must include voting for climate resolutions and taking action against boards of directors not making sufficient short and long term progress on climate.
- Recognize and promote human rights and the rights of Indigenous Peoples – Leadership requires recognizing and accounting for climate impacts already impacting people all over the world. BlackRock can lead finance in the right direction by adopting a policy that clearly outlines how it will address the rights of Indigenous Peoples and other vulnerable communities from whom climate change and the resource extraction that drives it are already a scourge. This should include adopting a no-deforestation policy that addresses climate impacts but standards and human rights and the land rights of Indigenous people. This policy could be phased in and applied universally across all extractive sectors that threaten the rights of Indigenous Peoples, local communities, and traditional landowners.
Then there is leadership that responds to the scientific consensus on the urgency and peril of climate change and moves the financial industry in line with this reality:
Taking climate destruction out of BlackRock’s active funds is a crucial first step, but it’s a drop in the bucket given that the vast majority of BlackRock’s assets under management are in its “passive” funds.
- Accountability for the harm of its passive funds – BlackRock has benefited tremendously from the wave of index investing and is in many ways responsible for driving the trend, which has been a disaster for the climate. By insisting there is nothing to be done about its index funds, BlackRock denies accountability for the havoc enabled by them, while continuing to expose its clients to the very risks it forecasts.
- Climate Funds by Default – Change is not impossible, as BlackRock claims–it is in fact necessary, and there is much that can be done. BlackRock can offer ESG funds and climate friendly funds as the default across its entire business. It can also incentivize shifting capital from funds based on yesterday’s energy system to ones that look toward the future–and aggressively market those.