The world’s largest asset manager seems to have gotten the message.

BlackRock, criticized by Al Gore and other environmentalists for putting profit above all other concerns, acknowledged today that “climate risk is investment risk” and promised that sustainability will be a guiding principle when it invests client money. The company, for one thing, is exiting investments in thermal coal, used in energy production.

BlackRock “will be increasingly disposed to vote against management and board directors” of companies that aren’t making “sufficient progress” on sustainability-related issues, CEO Larry Fink wrote. “Every government, company and shareholder must confront climate change,” he said in a letter  to CEOs published on BlackRock’s website along with a similar one to clients of the $6.8 trillion asset manager.

BlackRock, among the biggest shareholders of most of the world’s listed businesses, has come under criticism in recent months for not doing enough to combat climate change. Gore, the former U.S. vice president, last month accused BlackRock and Vanguard, the two largest U.S. asset managers, of helping finance the “destruction of human civilization.” And Ceres, a sustainability nonprofit, last year ranked BlackRock near the bottom of its annual analysis of mutual fund proxy voting on climate-related shareholder proposals, which used data from 2018.

“Every government, company and shareholder must confront climate change.”

“From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios,” Fink wrote. “They are seeking to understand both the physical risks associated with climate change as well as the ways that climate policy will impact prices, costs and demand across the entire economy.”

Fink said BlackRock would be asking companies it invests in to publish two disclosures by the end of the year. The first would discuss risks specific to the company’s industry and comply with Sustainability Accounting Standards Board guidelines, while the second would include information on the company’s own climate-related risks following recommendations from the Task Force on Climate-related Financial Disclosures. 

The company-specific disclosure should “include your plan for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized, as expressed by the TCFD guidelines,” Fink wrote.

  • Last week, BlackRock announced that it had joined the Climate Action 100+ initiative, which has more than 370 participants who pledge to act to support efforts to reduce greenhouse-gas emissions across the value chain, implement a strong governance framework and provide enhanced corporate disclosure.
  • BlackRock’s fossil fuel investments cost investors $90 billion in lost value and missed opportunities over the past decade, according to an August report from the Institute for Energy Economics and Financial Analysis.