US-based global investment management firm BlackRock Inc has sent out a warning to all companies interested in tapping into its immense assets that it will no longer be supporting companies that have not made sufficient progress in disclosing climate change and social risks.
According to a statement released on Tuesday, the company will be actively pulling out investments in thermal coal producers, while also voting against management in currently supported companies that do not adhere to its new environmental guidelines. The company aims to use its massive financial weight, worth more than $7 trillion, to promote sustainability, which is apparently its new standard for investing.
The plan comes as part of the latest annual letter to all chief executives by BlackRock's chairman and CEO, Larry Fink. The executive of the world's largest asset manager had previously made a similar call, asking companies to do more than just focus on their bottom lines but also make sure that they have a positive contribution to society as a whole.
Fink mentioned in his latest letter that he hopes that companies will help further develop the work the company has done in ensuring full disclosure and its investments in sustainability. The executive added that the company would be voting against management and board of directors of companies that do not follow its current business practices and plans.
The executive also outlined that a significant part of its plan will be to remove companies from its portfolio that generate more than 25 percent of their revenues from thermal coal production. The removal of the companies will apparently start by the middle of the year, which should provide enough time for necessary adjustments.
The strategy is likely a way for the company to ensure that the firms it is investing in adhere to new environmental regulations, while also attracting young investors that are increasingly more concerned about social and environmental issues. The rapidly changing environment and the rising concerns about the roles of large conglomerates have likely forced BlackRock to take a stand to ensure its own future progress.
Major markets such as China and Europe have all starting to roll out new regulations aimed at mitigating enterprise environmental and social risks. Last year, the European Union had adopted new rules that require funds, asset managers, and insurer to full disclose social and environmental risks tied to their investments. China had also made a similar move earlier in the month, requiring listed companies and issuers to fully disclose environmental and social risks involved in their respective businesses.
Analysts have pointed out that managing environmental risks will not just be about addressing the climate change issue for companies. It will also involve a certain degree of investment risk, as any type of fallout pertaining to its environmental responsibilities will have tangible repercussions.
