Published: Fri, January 17, 2020
Markets | By Otis Pena

Climate Change to Impact . .

Climate Change to Impact . .

BlackRock - which this week pledged to put sustainability at the heart of its investment process - saw its assets under management (AuM) grow by just under a quarter and total net inflows reaching a record $429 billion (€384.6 billion) by the end of 2019.

According to chief executive Larry Fink climate change has become a "defining factor" in companies' long-term prospects and recognises "climate risk as investment risk".

"Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding?"

Noting that BlackRock and the other investors have stated a commitment to climate action and a concern about climate risk, the Senators wrote: "Marathon's pattern of repeatedly opposing efforts to limit carbon pollution should be doubly concerning: first, because the transition to a low carbon economy is inevitable, and by deciding to forgo any diversification strategy: and second, because Marathon's effort to undermine climate policy run directly counter to your stated commitment in favor of climate action".

As explained in the article, in the annual letter sent by Laurence D. Fink, founder and chief executive of BlackRock, which has almost $7 trillion in investments, to the CEOs of the largest companies in the world, BlackRock announced that it intends to exit investments to the extent they "present a high sustainability-related risk".

All its passive index funds of course make it hard to predict the extent to which BlackRock will pursue investing in a decarbonized economy, especially at the expense of staying long in carbon economy stocks.

However, fears of a global slowdown have moderated through 2019 and investors have started to take on risk, he added.

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BlackRock will also seek to double the number of sustainability-focused exchange traded funds it provides to 150 and increase sustainable assets from $90bn to $1trn within the next ten years.

"We are aggressively embracing change", Mr. Fink told analysts Wednesday morning.

The shift by BlackRock is substantial.

"But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance", Fink said. "The evidence on climate risk is compelling investors to reassess core assumptions about modern finance". "Ultimately, objective is the engine of long-term profitability".

And as Citizen Truth previously wrote, Fink's principled stances appear to waiver easily, as the executive made a big deal out of refusing to attend Saudi Arabia's Future Investment Initiative, also known as Davos in the Desert in 2018, in protest to the execution of journalist Jamal Khashoggi, but returned a year later.

He revealed that it is the top issue that clients invariably raise with BlackRock, and that this is driving a "profound reassessment of risk" and asset values worldwide. But his motivations don't matter.

However, some critics were less impressed by BlackRock's statement, pointing to Fink's lack of meaningful action so far. We'll be watching, not because we care in the least about being a watchdog, but because there's so much at stake.

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