BlackRock ‘Anticipates’ 75% of Portfolio Edging Toward Net Zero by 2030

While the announcement from the world’s largest asset manager could potentially have significant influence on

While the announcement from the world’s largest asset manager could potentially have significant influence on lowering global emissions, BlackRock’s passive approach is a missed opportunity to actively drive the transition to a low-carbon, net-zero economy.

On Thursday, BlackRock
announced
that by 2030, at least 75 percent of its corporate and sovereign assets managed
on behalf of clients will be invested in issuers with science-based targets or
equivalent.

“Currently, approximately 25 percent of BlackRock assets under management
(“AUM”) with respect to corporate and sovereign issuers is invested for clients
in issuers with science-based targets or equivalent. As the transition proceeds
and issuers and asset owners continue to position themselves in front of it, we
anticipate that by 2030, at least 75 percent of BlackRock corporate and
sovereign assets managed on behalf of clients will be invested in issuers with
science-based targets or equivalent.”

Coming from the world’s largest institutional investor, this commitment could
potentially have significant influence on lowering global emissions. The actual
impact of the target, however, depends on whether BlackRock implements
guidelines to ensure that the heavy emitters in its portfolio are explicitly
covered by its goal.

BlackRock’s expectation that 75 percent of its corporate and sovereign assets
will align with science-based climate goals by 2030 potentially “sets a new bar
that could signal to the rest of the market that the investor transition to a
net-zero emissions economy is well underway,” says Mindy Lubber, CEO and
president of sustainability nonprofit Ceres.

“There’s no question that the transition to a net-zero economy is happening
apace and all investors would be wise to adjust their investment strategies
accordingly,” Lubber said in a
statement.
“When the largest asset manager in the world ups its goal from 25 percent of
such assets invested in science-based-target issuers to 75 percent of those
assets, others should take note. The climate crisis is a financial risk that
will continue to affect valuations.”

But not all stakeholders share Ceres’ optimism about the strength of BlackRock’s
statement. As finance watchdog group Reclaim Finance points
out
,
without concrete policies, BlackRock risks providing cover for the worst climate
actors to continue their polluting
business
as usual. Left unaddressed, this will create a loophole in the financial giant’s
net-zero commitment that will allow runaway emissions that could push the world
past 1.5°C global warming.

Reclaim Finance asserts BlackRock must also provide more details on how it will
evaluate if companies are actually achieving climate
targets.
It is crucial that companies’ commitments require halving emissions by 2030,
rather than relying on
offsets
and other unproven technologies.

“BlackRock must ensure that the bulk of the companies that it invests in have at
least halved their overall emissions by 2030,” says Lara Cuvelier,
Sustainable Investment Manager with Reclaim Finance. “If BlackRock doesn’t
disclose the concrete and timebound requests made to companies, this
announcement is another smokescreen. The world’s largest asset manager cannot
get away with vaguely defined commitments. It must act with urgency, especially
with respect to the fossil fuel expansionists in its portfolio that are leading
us to climate catastrophe.”

While more and more banks have begun to mobilize around climate change and have
made individual net-zero
pledges,
their continued investment in polluting sources of
energy
flies in the face of those pledges — and external pressure is mounting for them
to put their money where their mouths are.

In December, British banking giant HSBC set out a detailed
policy
to phase out the financing of coal-fired power and thermal coal mining by 2030
in EU and OECD markets, and worldwide by 2040 — in accordance with
International Energy Agency
recommendations. In recognition
of the rapid decline in coal
emissions
required for any viable pathway to 1.5°C , the plan will see HSBC phasing out
finance to clients whose transition plans are not compatible with the bank’s
net zero by 2050
target
.
Given HSBC’s substantial footprint across Asia, and the region’s heavy
reliance on coal today and its rapidly growing energy demand, HSBC recognizes it
has a critical role to play in helping to finance the region’s energy transition
from coal to clean. HSBC says it will expect its clients to lay out credible
transition plans for the next two decades to diversify away from coal-fired
power production to clean energy technologies.

So, it is possible for financial institutions to use their power and influence
to actively guide a clean-energy transition — yet BlackRock continues to insist
its role in the net-zero transition is merely “as a fiduciary to our clients …
to help them navigate investment risks and opportunities, not to engineer a
specific decarbonization outcome in the real economy.”

In his annual CEO
letter
in January, BlackRock CEO Larry Fink stressed that — while decarbonizing the global
economy is “the greatest investment opportunity of our lifetime, … divesting
from entire sectors will not get the world to net zero.” This week’s statement
echoes this sentiment:

“We expect to remain long-term investors in carbon-intensive companies, because
they play crucial roles in the economy and in a successful transition. The
success of these companies will be critical to the global economy, the world’s
low-carbon ambitions and our clients’ long-term financial goals. We do not
pursue broad divestment from sectors and industries as a policy — particularly
as a portfolio fully divested of such sectors in the near term may be at odds
with enabling an orderly transition to a net-zero economy in the long term.”

BlackRock signed on to the Net Zero Asset Managers initiative in March 2021. Under this
initiative, asset managers have committed to supporting the goal of net zero
emissions by 2050 or sooner, in line with efforts to limit warming to
1.5° Celsius, and to show progress on what percentage of their assets are
covered by this goal. According to BlackRock’s target submission to NZAM, the
scope of the target covers $7.3 trillion in assets under management — excluding
the firm’s real assets, infrastructure and private equity holdings.

“The sheer size of the commitment is significant as all investors seek to
address climate risks across capital markets,” Lubber said. “We will be working
with BlackRock and other investors to develop the data and methodologies to
focus on the asset classes excluded from BlackRock’s target and to measure the
real emissions reductions that this alignment target represents.”

But if the world’s largest asset manager continues to hedge its bets against
active decarbonization, the transition to a net-zero, clean-energy economy will
likely not take place with the urgency that is needed to avert climate disaster.

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