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Climate Change

'Net zero' here to stay, Asia mega-investor BlackRock says

Larry Fink pushes CEOs harder on climate in annual letter

In his annual letter to CEOs, BlackRock chief Larry Fink told companies around the world that "the climate transition presents a historic investment opportunity."   © Reuters

NEW YORK -- Larry Fink of BlackRock, the world's largest asset manager, is nudging companies to step up efforts on global warming by inquiring about how they will move to a climate-friendly economy.

"Given how central the energy transition will be to every company's growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net zero economy -- that is, one where global warming is limited to well below 2 degrees C, consistent with a global aspiration of net zero greenhouse gas emissions by 2050," wrote Fink, BlackRock's chairman and CEO, in his just-published annual letter to chief executives.

"We are asking you to disclose how this plan is incorporated into your long-term strategy and reviewed by your board of directors," he continued.

The request from one of the world's most influential investors sends a strong message to business leaders in Asia and elsewhere that climate as an investment trend is here to stay.

"We know that climate risk is investment risk," Fink wrote, referring to a thesis he introduced in his letter to CEOs last year. "But we also believe the climate transition presents a historic investment opportunity."

"The world is moving to net zero, and BlackRock believes that our clients are best served by being at the forefront of that transition," he explained.

With U.S. President Joe Biden days into his term, the letter comes at a time when leaders of the world's major economies once again agree on the urgency of addressing climate change. Biden brought the U.S. back into the Paris Agreement on his first day, made former Secretary of State John Kerry his special presidential envoy for climate, and plans more climate-related steps Wednesday.

Then-presidential candidate Joe Biden, right, and future climate czar John Kerry campaign together in Cedar Rapids, Iowa, in December 2019.   © Reuters

Biden's presidential campaign put forth a bold climate plan that would ensure that the U.S. reaches net-zero emissions by 2050, including through government investment. And last September, Chinese President Xi Jinping announced that his country aims to have carbon dioxide emissions peak before 2030 and to achieve carbon neutrality before 2060.

BlackRock, which reported $8.68 trillion in assets under management as of Dec. 31, has 162 Asia-Pacific funds and backs many of the region's biggest companies.

In a separate annual letter to clients, Fink and his team said BlackRock will publish "temperature alignment metric for our public equity and bond funds, for any markets with sufficiently reliable data," as well as "the proportion of our assets under management that are currently aligned to net zero."

These disclosures will help investors make informed decisions, according to Fink.

Skeptics of BlackRock's highly publicized climate proposals point to the firm's record on climate in the boardroom. BlackRock voted "overwhelmingly" against climate-related shareholder resolutions at S&P 500 companies, advocacy group Majority Action said in a 2020 report.

"These included proposals that would have held JPMorgan Chase's board accountable for its role as the world's largest fossil fuel financier, and as was also the case in 2019, a proposal to bring much-needed transparency to the lobbying efforts of Duke Energy, one of the largest and highest-emitting electric utilities in the U.S.," the report said.

But BlackRock itself is "carbon neutral today in our own operations" and is "committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner," Fink wrote in his CEO letter.

Under its BlackRock Investment Stewardship program, the firm votes against directors and for shareholder proposals in line with its climate concerns.

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