Non-profit calls for accelerated exit from fossil fuels as asset manager highlights nature-related risks.
BlackRock, the world’s largest asset manager, still holds investment worth US$75 billion in 30 major tar sands production companies, despite recent efforts to distance itself from fossil fuels and embrace sustainable investment principles, according to research from NGO Reclaim Finance.
Tar sands extraction and refining is regarded as a particularly polluting and carbon-intensive part of the fossil fuels industry. “The tar sands sector is a key example of a sector that is clearly inconsistent with keeping global warming below 1.5°C, as tar sands reserves are a ticking time bomb regarding climate objectives,” the non-profit organisation noted in its report.
According to BlackRock, the US$75 billion figure refers to its total exposure to firms investing in tar sands, rather than the firm’s exposure to the tar sands sector specific.
Global fossil fuel production needs to decrease by 6% every year until 2030 if the world is to remain on a 1.5°C pathway, the NGO said.
In Q1 2020, BlackRock announced iShares was rebranding its Sustainable Core ETFs as ‘aware’, meaning they would include companies exhibiting favourable ESG characteristics while also implementing additional screens that exclude companies with thermal coal and tar sands revenue exposure. BlackRock says use of screens by its funds can exclude issuers deriving more than 5% of their revenue from tar sand production and generation, thus offering investors “transparency and choice”.
BlackRock said it had achieved 100% ESG integration in its active strategies and warned it could vote against almost 200 firms in the upcoming 2021 AGMs for lack of progress on climate risk.
“Across index strategies, we provide clients choice – through the industry’s largest ESG index offering – as well as transparency and stewardship,” the firm said in a statement.
However, Reclaim Finance pointed out that BlackRock doesn’t have a global tar sands exclusion policy and currently has US$3.7 billion in three key pipeline companies which still have existing or proposed pipelines to carry tar sands oil out of Alberta, Canada: Enbridge, TC Energy and Plains All American Pipeline.
“BlackRock must act on the fact that our carbon budget no longer allows us to develop new fossil fuel projects […] BlackRock must no longer tolerate and invest in companies that keep exploring and opening new fossil fuel projects, starting with coal and unconventional oil and gas projects,” Reclaim Finance said.
Following BlackRock CEO Larry Fink’s commitment to transitioning to net-zero by 2050, Reclaim Finance has further called for BlackRock to provide more “specificity” on decarbonisation timelines and concrete standards for exclusion or voting.
BlackRock needs to improve its engagement with carbon-intensive corporates, the non-profit said, adding that there is a gap between the asset manager’s net-zero commitments and its own practices. “[This] raises questions about how BlackRock plans to take concrete action when it comes to the most dangerous industries it helps to enable.”
Today, the asset manager appeared to toughen its stance of nature-related risks and nature capital, with a warning to companies to publish their no deforestation policy and strategy on biodiversity.
The approach was revealed in BlackRock’s ‘2021 Stewardship Expectations’ report, which also highlighted the firm’s focus on board quality, the transition to a low-carbon economy and alignment of political activities with stated policy positions.
Previously, Reclaim Finance has flagged concerns around BlackRock’s exposure (around US$85 billion of assets) to coal, despite the asset manager pledging to “exit investments”.
In an op-ed piece in USA Today, Tariq Fancy, former CIO for Sustainable Investing at BlackRock, warned that sustainable investing has boiled down “to little more than marketing hype, PR spin and disingenuous promises from the investment community”.
“This multi-trillion-dollar arena of socially conscious investing is being presented as something it’s not. In essence, Wall Street is greenwashing the economic system and, in the process, creating a deadly distraction. I should know; I was at the heart of it,” he wrote.
This article has been updated to reflect clarifications from BlackRock.