This is a big deal. Blackrock just issued this statement (linked) stating that climate risk is investment risk, and they will be de-investing from companies that are over-exposed to climate risk (ie. highly climate-polluting). Blackrock is often described as the world’s richest money manager, with about $10 trillion to invest.
This is great news, because it’s the shot of a starting pistol. The last money manager holding climate-risky stock is going to lose it all. This signals the start in earnest of divestment from polluting industries. From now, climate-polluting corporations will find it harder to raise capital, buy insurance, and maintain their stock price. It’s the beginning of the end for the fossil fuel industry.
Sell your oil & gas stocks while you can.
A few excerpts from the letter from Blackrock’s CEO:
“Climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect. But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
“…because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”
“In a letter to our clients today, BlackRock announced a number of initiatives to place sustainability at the center of our investment approach, including: 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.”
“Over the next few years, one of the most important questions we will face is the scale and scope of government action on climate change, which will generally define the speed with which we move to a low-carbon economy. This challenge cannot be solved without a coordinated, international response from governments, aligned with the goals of the Paris Agreement.
“Under any scenario, the energy transition will still take decades. Despite recent rapid advances, the technology does not yet exist to cost-effectively replace many of today’s essential uses of hydrocarbons. We need to be mindful of the economic, scientific, social and political realities of the energy transition. Governments and the private sector must work together to pursue a transition that is both fair and just – we cannot leave behind parts of society, or entire countries in developing markets, as we pursue the path to a low-carbon world.”
There’s more. Check it out.
And for context: