Greening mechanisms

26 January 2021 By George Hay Follow @gfhay

The BlackRock boss will require companies to show how they will eliminate carbon emissions by 2050. The $9 trillion asset management giant’s largely passive funds cannot dump climate laggards. But Fink’s latest letter makes clear his active managers will show more strength.

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BlackRock Chief Executive Larry Fink said in his annual letter to CEOs on Jan. 26 that the $8.7 trillion asset manager would ask companies to disclose how their business models will be compatible with a net zero economy, where global warming is limited to well below 2 degrees Celsius by 2050.

Fink said BlackRock would ask companies to disclose how this plan is incorporated into long-term strategy, and for it to be reviewed by their boards. It will also do the same process itself.

Fink also said that large private companies should also embrace climate disclosures, and that issuers of public debt should be disclosing how they are addressing climate-related risks.

In a separate letter to clients, also on Jan. 26, BlackRock said it would implement a “heightened-scrutiny model” in its actively managed investment portfolios as a way to tackle securities of companies that pose significant climate risk.

BlackRock also said it would launch investment products with explicit temperature alignment goals, including products aligned to a net zero pathway; publish a temperature alignment metric for its public equity and bond funds; and later this year announce an interim target on the proportion of assets that would be aligned to net zero by 2030.

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Fink said BlackRock would ask companies to disclose how this plan is incorporated into long-term strategy, and for it to be reviewed by their boards. It will also do the same process itself.

Fink also said that large private companies should also embrace climate disclosures, and that issuers of public debt should be disclosing how they are addressing climate-related risks.

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