BlackRock will be publishing a temperature alignment metric for public equity and bond funds, where market data is sufficiently reliable, as part of a series of actions to help investors with their climate change-related goals, it disclosed today.
In an annual letter to clients, the global executive committee said BlackRock was “committed to supporting the goal of net-zero greenhouse gas emissions by 2050 or sooner” and taking a number of steps “to help investors prepare their portfolios for a net-zero world”.
In addition to adopting a temperature alignment metric for its own funds, it said it would this year work with index providers to publish the temperature alignment of major market indices.
Its pledge comes as a Task Force on Climate-related Financial Disclosures (TCFD) consultation on forward-looking climate metrics comes to an end tomorrow, and after Mark Carney challenged investors to agree on a measure of portfolio alignment.
BlackRock also told clients that it would by the end of the year publish the proportion of its assets under management that were currently aligned to net-zero. It also said it would announce an interim target on the proportion of its assets that would be aligned to net-zero in 2030.
The world’s largest asset manager did not make a commitment to the emissions associated with its assets being net-zero by a certain date, as some asset managers have.
However, it said that in 2021, it intended to expand its Scope 3 reporting to include the aggregate emissions attributable to the investment portfolios it managed on its clients’ behalf, “where data permits”.
“While these emissions will continue to reflect the investment decisions of our clients and the progress of the global economy towards net zero, we believe that over time, the initiatives set forth in this letter will serve to reduce the carbon intensity of our assets under management and increase the percentage of assets that are aligned to net zero,” the executive committee wrote.
‘Heightened scrutiny’
In its letter to clients, BlackRock said it was asking companies to disclose a business plan “aligned with the goal of limiting global warming to well below 2ºC, consistent with achieving net-zero global greenhouse gas emissions by 2050”.
As part of a “heightened scrutiny model”, it said that for companies deemed to present “a particularly significant climate-related risk” it would use its vote against management for index portfolio-held shares and “flag these holdings for potential exit” in its discretionary active portfolios.
On shareholder proposals it has said that “given the need for urgent action on many business-relevant sustainability issues, we will be more likely to support a shareholder proposal without waiting”. BlackRock has historically engaged to explain its views on a given issue to management and then given it ample time to address it.
Campaigners called out a lack of detail about what BlackRock would consider acceptable in the way of net-zero plans at fossil fuel companies, and challenged the asset manager over its investments in coal, including companies with coal expansion plans.
At InfluenceMap, executive director Dylan Tanner said it was disappointing that CEO Larry Fink, in his annual letter to corporate CEOs, “does not focus any attention on the corporate lobbying practices that so often act as a barrier to meaningful change”.
Last month BlackRock said it would require companies to confirm that their political lobbying activities align with their public statements, and that this expectation would extend to the trade associations these companies are affiliated with.
In early 2020, a few months before the coronavirus pandemic gripped Europe, BlackRock had in its letters to clients and corporate CEOs said it would place sustainability at the centre of its investment approach.
This year’s letters from BlackRock come a day after US pension funds wrote to CEO Larry Fink with a set of questions about how the asset manager would “reform both its own corporate practices as well as its approach to investment stewardship regarding the lack of transparency, alignment, and accountability in portfolio companies at which BlackRock votes proxies”.
Referring to the invasion of the US Capital earlier this month, they said: “We believe that the events of January 6 add greater urgency to concerns and expectations regarding corporate political spending and lobbying transparency and practices”.
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