Climate risk is investment risk
Sustainability advocate Fink goes to Davos by private jet to lobby against fossil fuel investments, prompts more questions about BlackRock approach with almost $6.9 trillion (£5.3tn) of assets – equivalent to 8% of Global GDP – BlackRock’s management, founder and chief executive Laurence D. Fink’s letter (www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter) to CEOs of 200 Top Global companies that stated “climate risk is investment risk” might arguably be able to influence/shift market sentiment and also investment behaviour towards more sustainable asset classes in what he proclaims as “our new standard for investing”.
In reality, of course, BlackRock does not tell its clients how to invest but offers them choices in various (mostly passive) investment vehicles and then follows their instructions on what they pick. While corporate governance expert Gerry Brown, and author of ‘The Independent Director’ (www.theindependentdirector.co.uk) endorses Fink’s sentiments on the need for investment in sustainable assets and also supports BlackRock’s changing investment decision priorities, he wonders if there might be something of an actual and ongoing hypocrisy and disconnect between BlackRock public statements and company actions.
“Having sent his (annual) letter to the CEOs of 200 Top Global companies stating that moving forwards investment decisions need to have environmental sustainability as a core goal, if actions are to speak louder than words then why does he then travel to the World Economic Forum in Davos, Switzerland to discuss it in person after it received so much news coverage?” notes Brown.
“Surely there are enough directors on the 18 person Board of Directors of BlackRock with sufficient independence or sincerely held concern able to assert their new found fossil-fuel freedom to kick open their environmental sustainability door and suggest to Mr Fink that he instead teleconference into this Davos event? I am pretty sure that event sponsor IBM help produce products that might assist with such teleconferencing matters. Do as I say not as I do is rarely a good look when it comes to fossil fuels, climate breakdown or private jets.”
Brown continues, “It is only last Autumn – after not travelling there by private jet – that Greta Thunberg warned us at the UN Climate Summit in Madrid, ‘The real danger is when politicians and CEOs are making it look like real action is happening, when in fact almost nothing is being done, apart from clever accounting and creative PR.’
“Additionally, Michael Brune of the Sierra Club again reminds us this week, ‘In the past, BlackRock has used its enormous financial leverage to support fossil fuel CEOs and spike climate-critical shareholder resolutions. Last year it voted against every single resolution backed by the Climate Action 100+ investor coalition, the same group that BlackRock just [in Fink’s 2020 letter to CEOs] committed to join.”
According to Brown, where Fink can assert and demonstrate the sincerity of his conversion to cause of sustainable investments is in the operation and corporate governance of BlackRock itself, particularly in regard to own activities – from investments practices, lobbying to the behaviours and composition of its executive board members and their constituency of other companies still investing in fossil fuels.