Climate emergency is altering how investors view the long-term

Joanna Partridge of The Guardian reports that the world's largest fund manager, BlackRock, CEO Larry Fink says climate crisis will now guide its investments.

Changing investment emphasis

He predicts fast reshaping of global finance. In his annual letter to chief executives, the BlackRock boss, Larry Fink, writes that the climate emergency is altering how investors view the long-term prospects of companies. “Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.” Fink’s statement marks a step change at the US investment firm. In his 2019 annual letter, Fink said his overriding duty was to make customers money.

BlackRock identifies several new measures in its investment approach, such as lowering its exposure to fossil fuel companies, which has been a major demand by environmental protesters. These include: “Making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening our commitment to sustainability and transparency in our investment stewardship activities.”
The company said it intended to play an active role in solving the climate crisis: “BlackRock does not see itself as a passive observer in the low-carbon transition. We believe we have a significant responsibility – as a provider of index funds, as a fiduciary, and as a member of society – to play a constructive role in the transition.”1

A fundamental reshaping of finance may make continuing investment in fossil fuels less secure and may strand assets of the fossil fuel companies.

References

1(2020, January 14). BlackRock says climate crisis will now guide its investments .... Retrieved January 14, 2020, from https://www.theguardian.com/business/2020/jan/14/blackrock-says-climate-crisis-will-now-guide-its-investments

Some climate answers from Katharine Hayhoe

In an interview with The Guardian, Katharine Hayhoe, an atmospheric scientist, director of the Climate Science Center at Texas Tech University, contributor to more than 125 scientific papers, prize winner for her science communication work and Stephen H Schneider award for outstanding climate science communication, is quoted saying 'A thermometer is not liberal or conservative'.

Important Answers

https://i.guim.co.uk/img/media/106a4c5513099a9d357810d3494de5255bf0dbee/0_59_7793_4676/master/7793.jpg?width=1125&quality=85&auto=format&fit=max&s=de43c03a32ddfae6ac60efedada8e4e6

She responds to the questions What is the best way out of the climate crisis? What policies would make a difference?

 The most important thing is to accelerate the realisation that we have to act. This means connecting the dots to show that the impacts are not distant any more: they are here and they affect our lives. It also means talking about solutions. The technology and knowledge are there. The economics already make sense. In Texas, where I live, the biggest military base, Fort Hood, switched last year to renewables because they were cheaper than natural gas. And finally, it means weaning ourselves off fossil fuels, which is challenged by the fact that the majority of the world’s richest companies have made their money from the fossil fuel economy – so the majority of the wealth and power remains in their hands…1

Later in the interview she is asked: What’s the role of global finance? Can money managers, shareholders and multinationals exert pressure and take positive action in ways that short-termist, vote-hungry politicians seem unable to do?

Yes! In the world we live in, money speaks loudly. Thanks to the growing divestment movement, we have seen cities, universities and entire countries, in the case of Ireland, withdrawing investments from fossil fuel assets. This isn’t only happening for ethical reasons but for practical ones as well. As clean energy continues to expand, those assets could become stranded. When money talks the world listens..1 

This update points to the direction required to mitigate some of the disastrous and expensive consequences of climate change.

 1(2019, January 6). Katharine Hayhoe: 'A thermometer is not liberal or conservative'. Retrieved January 9, 2020, from https://www.theguardian.com/science/2019/jan/06/katharine-hayhoe-interview-climate-change-scientist-crisis-hope