Overnight the world’s biggest investment fund, BlackRock, said it would dump more than half a billion dollars worth of thermal coal shares.
The announcement was part of an extraordinary letter urging company boards to step up their efforts to tackle climate change — from none other than the world’s biggest fossil fuel investor.
BlackRock has long faced the wrath of environmental groups and shareholders alike for propping up some of the world’s biggest polluters. The group manages upwards of US$7 trillion in funds, meaning any decision it makes ripples the world over.
In his influential ‘annual letter’ to CEOs, BlackRock chief executive and founder Larry Fink said that the fund would put climate change at the heart of its investment strategy.
“Climate change has become a defining factor in companies’ long-term prospects,” he said. “I believe we are on the edge of a fundamental reshaping of finance.”
Fink, a longtime Democrat who took home US$26.5 million last year, said the fund would exit investments that “present a high sustainability-related risk”, such as thermal coal.
This will see it dump shares in Australian miners New Hope Group and Whitehaven Coal from its active funds, analysts said.
“We do not believe that the long-term economic or investment rationale justifies continued investment in this sector,” Fink said.
So how significant is the announcement, and what impact will it have here?
BlackRock wields incredible power, not just as the manager of trillions of dollars in global assets but as a sort of market soothsayer. The annual Fink letters are treated as gospel in boardrooms, and Australian super funds will likely be under immense pressure to take notice.
The New York Times has already said the announcement could “reshape how corporate America does business” and put pressure on other large money managers to follow suit.
The announcement is also notable for going beyond the usual ‘tea and biscuits’ approach to engaging with companies to ‘do something’ about climate change. By dumping shares, it is showing that divestment is possible — a route that funds in Australia have been reluctant to follow.
“This is a clear signal that there are limits to engagement. Australian investors should heed this advice — coal companies are beyond redemption,” Dan Gocher, a director at the Australasian Centre for Corporate Responsibility, said.
Climate advocates back home have been quick to use the announcement to show that the Coalition’s inaction on climate change was increasingly out of step — even in the corporate world.
“World’s largest investor is out. Still think thermal coal will last 20 years in Australia? Highly unlikely,” Australian billionaire Mike Cannon-Brookes tweeted. Cannon-Brookes is planning to build the world’s biggest solar farm in the Northern Territory.
A spokesperson for the Minerals Council of Australia said the industry was “proud of its approach to sustainable mining and environmental responsibility”.
BlackRock has faced growing criticism about its role as the world’s biggest investor in fossil fuels. Environmental groups and shareholder activists have urged it to take action, with protesters targeting its offices in London last October. BlackRock’s voting record on companies’ climate change resolutions has also been criticised for failing to live up to its public commitments to tackle climate change.
But in evidence that the ‘Greta’ effect was starting to seep into even the highest echelons of corporate finance, BlackRock last week announced it was joining Climate Action 100+, a group of global investors that is trying to get the world’s largest corporate greenhouse gas emitters to take necessary action on climate change.
Nevertheless, Geraldine Buckingham, BlackRock’s Asia Pacific head, told the Australian Financial Review the coal ban was not about “personal or individual views about environment, or you know, what the right policy responses are”. Instead it was about managing risk.
“It’s become very clear, I think, in the last few years that climate risk represents significant investment risk in portfolios and I think that the regulators, as well as managers like BlackRock, are saying that this risk in the portfolio is material.”
Looks like the end of the love affair between Scotty from Marketing and Black Rocks. Who will accompany him into Parliament on his next stunt?
It’s worth understanding the intent behind the building of world’s biggest solar farm in the NT (which is equivalent to 1/6th of Australia’s current total generation capacity).
Cannon-Brookes, ‘Twiggy Forest’ & Co aren’t just building a whopping solar farm, they plan to attach it to storage capacity a couple of hundred times bigger than SA’s ‘big battery’.
From there, they plan to run a newer fangled ‘HVDC’ transmission line to Darwin, then onto the seabed, all the way to Singapore, some 4000 odd km in all.
The current plan is not to supply any of the output into the Australian market. The problem is the grid, in particular the bit between generator and distributor i.e. the transmission system.
If the mandarins of the Australian enewrgy market don’t start listening to the head of AEMO, Audrey Zibelman, a lot more energy is going to be exported.
She is one smart woman, and the mandarins did well to entice her here from the US North East.
But, to get full value from that appointment, they really do need to listen to what she’s saying.
Audrey Zibelman is one smart woman. She must be – Alan Jones hates her.
Can’t say fairer than that!
Noice one, DF.
Money talks &, in this case, it’s shouting a warning from BlackRock.
The Rockefellers ditched fossil fuel back in 2014 & other smart ones are gradually catching on.
“ Asked about BlackRock’s announced withdrawal from thermal coal, Mr Morrison said the resources industry was “incredibly important to Australia” and that coal exports were worth about $70 billion a year.“
https://www.afr.com/companies/mining/pm-backs-coal-after-blackrock-quits-20200115-p53rnv
Let’s not mention the small matter of destroying the planet. That has no monetary value.
It’s impossible to calculate but how much of that $70 Billion is eaten into through the cost to our nation of annual bushfires & the consequences of hazardous smoke etc?
What will the costs be to accommodate bushfire victims, rebuild houses & infrastructure, Centrelink payments, wildlife rescue & rehabilitation?
And what are the costs to international tourism – why visit the world’s most beautiful natural harbour when it’s too hazy to see it?
What costs for cancelling a Grand Slam tennis tournament if it’s too smoky to play? Or a cricket test?
And what are the short & longterm health costs for treatment of people affected by smoke – especially the firefighters?
$70 Billion sounds like chickenfeed.
$70 billion is the gross figure. Coal royalties amount to less than 2% of the NSW budget. All the significant amount of diesel used in the mines is imported as is all the machinery. 80% of the industry is foreign owned so the profits go offshore and most coal companies pay no tax.
I suspect that the Prime Marketer was referring to the value of coal exports to the economy, not to Government coffers. That $80 bn pays for a lot of operating costs, like wages and salaries, fuel, supplies, as well as profit, royalties and other taxes. Your argument sounds scarily like the line that says the economy is in surplus because the Federal budget is in surplus (albeit, not for much longer I suspect).
I was trying to make the point that Morrison is one of those people who knows the price of everything ($70 Billion) & the value of nothing.
The cost of current & ongoing bushfire disasters will be incalculable, it cannot be expressed purely in a figure.
I am glad Ms Buckingham of BlackRock Asia Pacific clarified the move to divest from coal, it is purely about risk management; gee for a moment I was thinking financial sector investment executives maybe had a conscience or valued something more than bucket loads of money.