If climate change is not made a priority, the directors of major companies risk losing their jobs. That is the promise of financial giant BlackRock.
"The board is responsible for protecting the long-term economic interests of shareholders, and we may vote against the re-election of certain directors when we believe they have failed to honour their duty." And honouring one's duty, for those leading a major global company, also means taking into account the risks associated with climate change and responding accordingly. So says BlackRock, the world's largest investment firm.
Responding to increasingly frequent requests for clarification from clients and the public, BlackRock has explained its choices for 2017 and published a new paper setting out its climate policies — a topic to which two previous publications had already been dedicated in recent months (entitled The price of climate change – The impact of global warming on portfolios and Adapting investment portfolios to climate change).
The position is clear: from this year onwards, climate change will be a priority. Because it will change the game for many companies, bringing both risks and opportunities for their investors. To that end, BlackRock commits to actively engaging with company management, urging it to understand and measure the impact of climate risk on business, to work to adapt and mitigate those risks, and to report all of this to shareholders. In the absence of progress, BlackRock threatens to vote against the re-election of the board of directors — and to support shareholder resolutions that intervene where directors are hesitant.
For BlackRock, this could represent a sharp change of course, following a period in which its climate policies were rather inconsistent. In 2015, the firm backed a resolution calling on oil companies Shell and BP to work to align their business models with the Paris Agreement, which will in all likelihood cause demand for coal and oil to collapse in the coming years. But when, in spring 2016, investors put forward similar motions at the shareholder meetings of Exxon and Chevron, BlackRock — which, given its size, could have been the deciding factor — voted against.
With a portfolio of $5.1 trillion, BlackRock can be said to be the largest asset manager on the planet. Founded in 1988 within the Blackstone Group, after a few years it became independent on the initiative of its co-founder, Lawrence "Larry" Fink, who over the years has established himself as one of the key figures in global finance, going so far as to become one of Barack Obama's trusted advisers. According to many observers, BlackRock's success lies in having been born at the right moment, in having quickly forged strategic ties with American politics, and in having become the first truly international fund. Today it is among the principal shareholders of Google, Apple, Microsoft, Exxon, Chevron and many other giants of the global economy.