Sustainability at BlackRock
BlackRock is an America based world’s largest asset manager with more than $8 trillion assets. It operates globally in 30 countries and is considered one of the biggest Index funds.
70% of BlackRock’s investment until early 2020 were exposed to oil, gas, thermal coal reserves, beef, palm oil and soy industry which has led to nearly 40,000 hectares of deforestation and contributed to intensive carbon emission.
After being called out for heavy capital investments in climate destruction companies, in 2020 Blackrock CEO Larry Fink committed to change. And since then, it is making every effort to be on top of sustainable investing by offering ESG linked funds to its clients for better risk adjusted returns.
The company has been extensively trying to move their focus to climate related strategies in carbon-intensive (good chunk of market capitalization) and CO2 emission sectors, as these companies face material financial risks in transitioning to a low-carbon economy. Blackrock has promoted the importance of TCFD (Taskforce on Climate related Financial disclosures) to the Carbon intensive companies and kept them on watch for 18 months — upon the non-compliance of which, Blackrock will vote against investing in these companies.
BlackRock has released various equity and fixed income based sustainable investments in 2020, each fund being a mix of different strategies. Most of them being US dollar denominated investment grade bonds & equity indices-based ETFs composed of U.S. companies that have positive Environmental, social and Governance impact, and a couple of them being global fund (like the global green bond).
Recently the company has also released a new suite of iShares funds with ESG linked features, rating ranging from A to BBB, scoring an average sustainability rating of 7 on 10. With its Avoid (exclude negative screening Companies) and Advance (invest in ESG favored companies) strategy BlackRock aims to achieve the below trend in its Asset allocation.
In my opinion, despite the company’s effort to achieve the title of sustainability, BlackRock continues to hold investment in companies with deforestation risk, oil, gas intensive sectors in its ESG funds — owing to their huge market capitalization and wary of the fact that a sustainable change cannot happen overnight.
But hopefully in the coming times, by promoting TCFD reporting the company will be able to convince these sectors to reduce climate destruction activities by encouraging them to lower their carbon footprints and resorting to making environment friendly products. This in turn is expected to help BlackRock improve its sustainability score and ESG coverage, and also make a positive impact in the fight for climate change.
References from-esgclarity.com, blackrock.com
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