The Limits of Environmental Activism From BlackRock’s Larry Fink – by Nathaniel Taplin (Wall Street Journal – January 21, 2020)

The world’s largest active manager has taken a meaningful step, but corporate finance is relatively powerless to curb carbon emission as coal assets move into state hands

Saving the planet needs coordination from Washington and Beijing, not New York and Hong Kong. Larry Fink, chief executive of BlackRock, BLK -1.02% made waves last week with his pledge to push environmental concerns up the corporate agenda. The world’s largest asset manager will drop major power-coal producers from its actively managed funds by mid-2020, among other plans.

This is no mere publicity stunt: Even a modest change to the composition of $7 trillion under management is nothing to sniff at. But if BlackRock really wants to avoid coal, it needs to sharpen its divestment criteria.

And if other money managers don’t follow suit—particularly on the debt side—then the impact will be limited. Wall Street also has minimal ability to influence state-owned companies, which are now among the top coal producers.

One criticism of BlackRock’s intervention that can be easily refuted is that coal is already on its way out. Coal use has fallen rapidly in the West, but that has been more than made up for by rising consumption in India and China over the past decade.

Both nations continue to invest heavily in the commodity. Under its “stated policies” scenario, the International Energy Agency forecasts higher global coal consumption by 2030 and only marginally lower consumption by 2040. Coal-fired power plants were the single largest contributor to growth in emissions in 2018, notes the IEA.

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