Page 4 - AsiaElec Week 03

AsiaElec COMMENTARY AsiaElec
BlackRock commits to decarbonisation
BlackRock now equates climate risk with investment risk and will move partly, but not fully, away from fossil fuels
GLOBAL
WHAT:
BlackRock is to target companies where coal accounts for at least 25% of revenues
WHY:
Climate change is too big a risk to be ignored
WHAT NEXT:
Blackrock says there will be a fundamental reshaping of finance as climate change governs all investment decisions
DECARBONISING the global economy in a bid to combat climate change has dominated the energy news at the start of 2020.
Key investors have called for divesting away for fossil fuels, with global fund manager Black- Rock claiming that the environmental impact of any investment would be now a major driver of their future investment strategy.
Put simply, the private equity firm is leading the way in equating climate risk with investment risk and will now move partly, but not fully, away from fossil fuels.
BlackRock
Coal’s attractiveness as an investment has taken a firm beating in January, with BlackRock saying it would divest its US$7tn portfolio away from coal.
BlackRock CEO Larry Fink said that its “fidu- ciary duty” to its investors obliged it to divest its $1.8tn of actively managed funds away from any firm generating more than 25% of revenue from thermal coal.
“Climate change has become a defining factor in companies’ long-term prospects...Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Fink said in an open letter.
Crucially, Fink said that the stranded asset risk was not yet priced into the market, so as a fiduciary, it really had no choice but to act. In other words, climate change was too risky a con- cept to put a price on.
In addition to selling its shares in dirty, coal-reliant companies, the fund manager will vote against company boards that fail to commit to global sustainability standards, create a new generation of sustainable investment funds and place more emphasis on economic, social and governance (ESG) in its investment strategies.
It has also joined Climate Action 100+, which unites investors that put pressure on corpora- tions to take more action on climate change.
BlackRock’s comments are likely to begin a domino-like effect as green investment becomes more prominent.
Blackrock’s will now require company boards to meet global green reporting standards, such as that drawn up by the Task Force on Climate
Related Financial Disclosures and the Sustaina- bility Accounting Standards Board.
Other fund managers are likely to follow as ESG becomes a pivotal element of investment thinking.
Carbon neutral
Yet BlackRock did not divest fully from fossil fuels; Fink’s enthusiastic backing of gas projects illustrates continued support for coal by the world’s leading energy companies.
Siemens, for example, last week maintained its involvement in Adani’s controversial Carmi- chael Mine project in Australia.
Siemens is to supply signalling services for the new railway line that will carry Carmichael coal to the coast for export to Asia.
CEO Joe Kaeser acknowledged at the week- end that climate change was now a major factor in corporate thinking.
“While I do have a lot of empathy for envi- ronmental matters, I do need to balance differ- ent interests of different stakeholders,” he said, pledging to “give environmental concerns more attention in the future” by setting up a sustaina- bility committee.
His comments follow the company’s com- mitment in November to become “carbon-neu- tral” by 2030.
Other big names that must deal with climate change include Vestas, which has become the first turbine manufacturer to commit to zero- waste manufacturing across its supply chain by 2040.
Vestas noted that waste generated from man- ufacturing turbine blades alone was estimated to reach an accumulated 43mn tonnes by 2050, even though its own turbines were now 85% recyclable.
With the global wind market set to grow by 3% per year in the coming decade, the wind sec- tor’s carbon footprint will be crucial, as will all industrial and manufacturing sectors.
World Economic Forum
Elsewhere, the World Economic Forum, which meets this week in Davos, has warned that not enough progress has been made to limit emis- sions, as agreed by the 2015 Paris Agreement,
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w w w. N E W S B A S E . c o m Week 03 22•January•2020