At least three quarters of BlackRock’s managed assets invested in corporate and sovereign issuers are expected to be invested in issuers with science-based net zero-aligned climate targets by 2030, according to a new report by the investment giant.
BlackRock has emerged as a leading voice in the investment community on climate issues, with Chairman and CEO Larry Fink’s high-profile annual letters to CEOs over the past several years highlighting BlackRock’s increasing focus on sustainability and climate action in the firm’s investment process, the need for consistent and high quality data and climate disclosure, and the increasing impact of companies’ ability to navigate the transition on capital allocation decisions.
More recently, Fink warned that the Russian invasion of Ukraine has caused an adjustment in global energy considerations, with energy security joining the list of priorities alongside the climate-driven energy transition, likely resulting in a near-term slowdown in progress towards net zero goals, but likely accelerating the long-term shift to cleaner energy sources, with several countries already indicating plans to turn to renewable energy sources to establish energy independence.
In its 2021 TCFD report, published Thursday, BlackRock reiterated these positions, including the statement from Fink’s 2020 letter that “climate risk is investment risk,” and that better long-term outcomes will be generated by investors that position themselves well with respect to climate risk and the energy transition. The report also outlines BlackRock’s expectation that the “climate transition will create historic investment opportunities” for the firm’s clients.
BlackRock outlined several of the initiatives underway at the firm to help clients navigate these risks and take advantage of the emerging opportunities, including engaging with portfolio companies on addressing these risks in their businesses and positioning for the transition, providing technology tools to measure and assess portfolio climate risk, and providing new investment funds targeting climate transition opportunities.
BlackRock noted that around 25% of its assets under management with respect to corporate and sovereign issuers is currently invested in issuers that have science-based targets aligned with achieving net zero by 2050, and that this figure is expected to rise to 75% by 2030, based on its projections of the rate at which these issuers will adopt these targets in the interim period. The company noted that in order to achieve the Science Based Targets initiative’s call on financial institutions to set a path to 100% science-based targets coverage in portfolios by 2040, it would need to achieve a minimum of 61% covered by such targets by 2030.
Click here to view BlackRock’s 2021 TCFD report.
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