Larry Fink, arguably the world’s most powerful investor, has just delivered his annual letter to chief executives. This year, the chairman of giant money manager BlackRock Inc. used his institutional pulpit to thunder about the mounting dangers of climate change and preach the virtues of sustainable investing.
It is all good, praiseworthy stuff from a company with nearly US$7-trillion in assets under management. Just don’t assume it means a major shift in policy.
Take, for example, Mr. Fink’s announcement that BlackRock’s actively managed funds are in the process of dumping bonds or stocks issued by companies that generate more than 25 per cent of their revenue from thermal coal production.
A naive reader might see that divestiture as an impressive blow for good. More realistically, it amounts to ratifying what the market has already done. Major thermal coal producers have seen their values shrivel as the case against coal has grown. In one glaring example, shares of Peabody Energy Inc., a major U.S. miner of thermal coal, lost three quarters of their value over the past 18 months.
Getting out of such sad sack investments doesn’t amount to a moral awakening. It is simply self-interest. And a bit late at that. But let’s not quibble. It is still good news to see BlackRock arguing the case for transitioning to a low-carbon economy. It has not always been so forthright.