BlackRock commits to “new standard” for ESG

Investment behemoth to overhaul strategy and drive ESG integration

The world’s biggest asset manager BlackRock has declared it will make sustainability its “new standard” for investing following growing criticism over its failure to address climate-related risks.

In its annual letter to clients, BlackRock, which manages $7 trillion of assets, surprised the investment world by announcing it will overhaul its current strategy and bring in a raft of new changes to drive ESG integration across its investment processes.

The changes include ditching investments the firm perceives a sustainability risk, including thermal coal producers.

The firm said it was in the process of removing the public securities of companies that generate more than 25% of their revenues from thermal coal production from its discretionary active investment portfolios. It will aim to do this by the middle of 2020.

BlackRock will also double its offering of ESG ETFs over the next few years to 150, and launch sustainable versions of its flagship index products including its Target Allocation range of models and iShares.

By the end of 2020, all of the investment giant’s active portfolios and advisory strategies will be fully ESG integrated, according to the firm.

In a separate letter to CEOs, BlackRock’s chief executive Larry Fink said: “Climate change has become a defining factor in companies’ long-term prospects.

“Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect.

But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”

Fink also warned that the company would be “increasingly disposed” to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures.

As one of the largest investors in public oil, gas and coal companies, BlackRock has come under increased scrutiny for failing to take enough action on climate change.

Last year, Extinction Rebellion staged a number of demonstrations outside Blackrock’s London offices, calling the firm “the world’s top backer of companies that destroy the Amazon rainforest”.