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BlackRock, the world’s largest asset manager, has just revealed that it has punished 53 companies in its portfolio over climate inaction. The move is a part of the firm’s ramping up of its climate engagement with businesses after it joined the Climate Action 100+ pact earlier this year. Among the companies that BlackRock has taken action against are Chevron, ExxonMobil and Volvo.
In a new report released on July 14, the global asset manager outlined how it is changing its investment stewardship strategy following its pledge to Climate Action 100+ pact, a move that came after the firm experienced widespread criticism about greenwashing. The review showed that 244 companies in BlackRock’s portfolios had been put on a watchlist for making insufficient progress to integrate climate risks into their financial disclosures and business approaches.
Out of this group, 53 companies – among them dirty energy giants ExxonMobil, Chevron, Air Liquide and Peabody Energy and carmakers Daimler and Volvo – have been found to have repeatedly ignored climate demands from investors. BlackRock said that it has taken voting action against these companies at an annual meeting, either by calling for executive accountability or backing new shareholder proposals that involve more stringent environmental policies.
“When we vote against a company, we do so with a singular purpose: maximizing long-term value for shareholders,” the report said. “We believe sustainability is core to value creation for our clients.”
Climate Action 100+ requires signatories to pressure companies in their portfolios to reduce greenhouse gas emissions in line with the targets under the Paris Agreement, outline the board’s accountability on climate risk, and disclose any financial risks associated with the climate crisis.
The remaining 191 companies that did not face voting action from BlackRock have now been warned and are “put on watch” until 2021. If these companies do not make substantial progress to comply with recommendations made by the Task Force on Climate-Related Disclosures (TCFD), they will risk facing voting action next year.
“Going forward, we will continue to review our process for engaging and voting on climate risk and other sustainability-related issues,” stated the asset manager.
“We have made important progress heightening our focus on sustainability, but we are also committed to constantly enhancing our approach in order to protect our clients’ long-term investments.”
BlackRock’s crackdown on carbon-intensive businesses is an acknowledgement that climate change must be a risk that is priced in and followed up with real demonstrable action. Bad corporate stewardship on environmental, social and governance (ESG) factors have proven costly for firms in recent months.
In addition to mitigating risks to firms’ balance sheets, climate action in the finance world has provided cushioning for portfolios against stock market volatility, particularly amid the coronavirus crisis, which has seen sustainable investments outperform traditional funds.
Lead image courtesy of Andrew Burton / Getty Images.