By Bill McKibben
If you felt the earth tremble a little bit in Manhattan on Tuesday morning, it was likely caused by the sheer heft of vast amounts of money starting to shift. “Seismic” is the only word to describe the recent decision of the asset-management firm BlackRock to acknowledge the urgency of the climate crisis and begin (emphasis on begin) to start redirecting its investments.
By one estimate, there’s about eighty trillion dollars of money on the planet. If that’s correct, then BlackRock’s holding of seven trillion dollars means that nearly a dime of every dollar rests in its digital files, mostly in the form of stocks it invests in for pension funds and the like. So when BlackRock’s C.E.O., Larry Fink, devoted his annual letter to investors to explaining that climate change has now put us “on the edge of a fundamental reshaping of finance,” it marked a watershed moment in climate history.
He’s right about the financial future, of course—one can’t look at the clouds of smoke now obscuring the Australian continent and come away thinking that we can maintain our present course. But anyone paying attention—which includes investment-fund C.E.O.s—has known the score for years. What’s changed now are a couple of factors.
For one, fossil-fuel stocks have begun to drag down portfolios. As the Times observed, “Had Mr. Fink moved a decade ago to pull BlackRock’s funds out of companies that contribute to climate change, his clients would have been well served. In the past 10 years, through Friday, companies in the S&P 500 energy sector had gained just 2 percent in total. In the same period, the broader S&P 500 nearly tripled.”
But, at least as important, public pressure just keeps mounting. Activist campaigns have been working to make the financial industry start to pay attention. (I’m involved with one, and was among those arrested, on Friday, after a sojourn in the lobby of a Chase branch.) In the past few months, Goldman Sachs, Liberty Mutual, and the Hartford Financial Services Group, Inc., have all put forth new climate policies, and the European Investment Bank—the largest international public bank in the world—announced that it would stop lending to fossil-fuel projects altogether.
Meanwhile, more and more people around the world have started questioning their financial advisers. Climate change, Fink said in his letter, is “almost invariably the top issue that clients around the world raise with BlackRock.” And BlackRock’s clients aren’t the only ones concerned, so you may well see Vanguard and State Street, the other asset-managing behemoths, following this lead in the months to come.
BlackRock’s actual policy changes are modest compared with Fink’s rhetoric. At least at first, the main change will be to rid the firm’s actively managed portfolio (about $1.8 trillion in value) of coal stocks; but coal, though still a major contributor to climate change, is already on the wane, except in Asia. The companies that mine it have tanked in value—even Donald Trump’s coddling has been unable to slow the industry’s decline in this country. So an investor swearing off coal is a bit like cutting cake out of your diet but clinging to a slice of pie and a box of doughnuts.
And Fink is apparently stuck in a decade-old time warp, suggesting on CNBC that “natural gas plays a very large role in the energy transition.” This is also the new official position of the American Petroleum Institute; sadly, the science shows that fracking for natural gas releases large amounts of methane, the second-most significant contributor to climate change…
Read the whole essay here.