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Money Climate is changing. Investing needs to, too, says BlackRock

23:25  14 january  2020
23:25  14 january  2020 Source:   msn.com

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“ Climate change is almost invariably the top issue that clients around the world raise with BlackRock ,” he wrote in his letter. Investors will be able to choose these instead of more traditional funds. To the extent that fossil fuel companies are in an index, BlackRock plans to push them to consider their

“ Climate change has become a defining factor in companies’ long-term prospects," BlackRock CEO Larry Fink said Tuesday in his annual letter to company executives. The world's largest money manager said that it will roll out a number of new product offerings that focus on sustainable investing .

Laurence D. Fink wearing a suit and tie © Provided by The Canadian Press

NEW YORK — A changing climate means dramatic risks for the world — and for investments too, the chief of the world’s largest investment manager said Tuesday.

To prepare for and protect against those risks, BlackRock CEO Laurence Fink said in his influential annual letter to CEOs that his firm, which manages roughly $7 trillion for investors, will make a series of moves putting climate change and sustainability at the centre of its investing approach.

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Among them, BlackRock will cut out investments in some coal producers from some of its portfolios, sharply increase the number of sustainability-focused funds that it offers, and vote against companies at shareholder meetings when they’re too slow in disclosing and mitigating their impact on the environment.

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“ Climate risk is investment risk,” Fink wrote.“Indeed, climate change is almost invariably the top issue that BlackRock (BLK) will exit investments with “high sustainability-related risk” such as thermal coal Fink said BlackRock would also increasingly use its power as a shareholder to vote against

In a letter to investors , BlackRock announced it would exit investments with high environmental risks, including thermal coal producers. “ Climate change has become a defining factor in companies’ long-term prospects,” BlackRock chairman and chief executive Larry Fink said in his annual letter to CEOs.

“Climate change has become a defining factor in companies’ long-term prospects,” Fink wrote in his letter, adding that he believes “we are on the edge of a fundamental reshaping of finance” because of it.

Fink predicted that the changes in how capital is deployed will come "more quickly than we see changes to the climate itself,” and “sooner than most anticipate.”

In fact, the shift is already underway.

Investors poured a net $20.6 billion into sustainable funds across the industry last year, nearly quadruple the record set a year earlier, according to Morningstar. Investors, particularly younger ones, increasingly say they want their money invested with an eye toward sustainability. The total dollars are still small relative to the entire industry — investors plugged a total of $413.9 billion into all taxable bond funds last year, while yanking $41.3 billion out of all U.S. stock funds — but the trend is clear and accelerating.

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While BlackRock is attempting to profit from changing investor values and invoke some kind of action against climate change , Vanguard has remained silent. The firm might have publically said it is concerned about climate risks, yet it offers nothing to investors in Europe that can help mitigate them.

Add to myFT. BlackRock needs to deliver on climate pledges. The world’s largest asset manager promises to reshape finance. What is needed in the fight against climate change are standards that everyone agrees on and that can serve as benchmarks for comparison — both internally and externally.

Fearful of losing out on those dollars — and the fees that they produce — investment companies are rushing to meet the surging demand.

BlackRock and other huge asset managers are generally behind smaller competitors when it comes to sustainability, said Danielle Fugere, president of shareholder-advocacy group As You Sow. BlackRock, State Street, Vanguard and others have been criticized for not doing more about the environment. Besides protests outside its Manhattan headquarters, BlackRock has also heard criticism from members of Congress who believe it could better address climate change.

Because of its size and reach, any shift in focus by BlackRock could alter the industry. It is a major shareholder in thousands of companies through its popular exchange-traded funds that track various indexes, as well as its funds run by stock-picking managers. But Fugere said Tuesday's announcement is only a first step.

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" Climate change is almost invariably the top issue that clients around the world raise with BlackRock . From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios," Fink continued. "And because capital markets pull future risk forward

BlackRock CEO says climate crisis will now dictate investments but environmentalists remain wary. “ BlackRock remains waist-deep in fossil fuel investments and the world’s top backer of Outgoing Bank of England governor says financial sector cutting back too slowly on investing in oil.

“The words are significant, and the words show leadership," Fugere said. “But that's not enough. We have to see on the ground action, and we need to see it quickly. There is no time. Australia is burning up. California is burning up.”

The wildfires in parts of Australia and California and other recent disasters have shown big institutional investors that climate change is just as much a threat to their returns in the near term as over the coming decades.

“The physical risks have become so immediately clear and stark,” said Amy Borrus, deputy director of the Council for Institutional Investors, whose members include pension funds, endowments and other U.S.-based asset owners investing more than $4 trillion.

“Many institutional investors will welcome these steps by BlackRock," she said. “More and more public funds are coming around to the view that sound environmental, social and governance practices are not just about making the world better but about fundamentally creating and preserving shareholder value."

This approach to investing comes after a yearslong evolution for the industry, which began with simple funds that bluntly excluded stocks deemed as harmful, such as gun makers or tobacco stocks.

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BlackRock CEO Larry Fink's warning about climate change risk-on investments makes a company like Tesla quite attractive, CNBC's Jim Cramer said . He also detailed BlackRock 's plans to put sustainability at the "center of our investment approach," including everything from portfolio

Investment management giant BlackRock has vowed to put sustainable investment at the heart of its future investment decisions worldwide, founder and CEO Laurence Fink announced on Tuesday. Scientists say climate change is responsible for the fires' devastating intensity.

Now, fund managers say they they look at environmental, social and governance issues broadly as part of their analysis of any investment. It's known as “ESG” investing, and proponents say it aids investors’ returns, not just their consciences, because it helps them avoid risky stocks and big potential losses. Companies with poor records on environmental issues are more likely to face big fines, for example.

For all the noise made by Fink's announcement, the reaction in the stock market was muted on Tuesday. Energy stocks in the S&P 500 were down, but not as much as some other corners of the market. Coal stocks were mixed.

In his letter, Fink said companies and investors have a role to play in the transition to a low-carbon world, but governments will ultimately need to lead the way.

Some movement has begun. The European Union on Tuesday unveiled a plan to dedicate a quarter of its budget to tackling climate change and to help shift 1 trillion euros ($1.1 trillion) in investment towards making the economy more environmentally friendly over the next 10 years. The Europe Investment Plan will be funded by the EU budget and the private sector. It aims to deliver on European Commission president Ursula von der Leyen's Green Deal to make the bloc the world's first carbon-neutral continent by 2050.

“It will be interesting to see whether BlackRock's high profile move will have any impact on policy,” Borrus said. “Government can do much more in the long run on climate change than investment flows.”

____

AP Reporter Samuel Petrequin contributed to this report from Brussels.

Stan Choe, The Associated Press

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Microsoft's ambitious climate plan aims to go carbon negative by 2030 .
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