Risk BlackRock CEO: Climate Change is Causing a 'Fundamental Reshaping of Finance'

Katie Ramirez
January 17, 2020

Fink said investors increasingly recognised climate risk was also an investment risk, with climate change "almost invariably" the top issue raised by clients worldwide.

Further, BlackRock must act to aggressively change the way agricultural commodity companies operate to help reverse the global deforestation crisis.

In his annual letter to CEOs posted on the company's website on Tuesday, Fink forecast a "fundamental reshaping of finance" and said companies must act or face anger from investors over how unsustainable business practices might curb their future wealth.

According to BlackRock's chairman and chief executive Larry Fink, the results "reflect the systematic investments we've made to build broader and deeper client relationships and meet their evolving needs".

However, Emma Herd from the Investor Group on Climate Change (IGCC), which represents institutional investors with more than $2 trillion in funds under management, said the message sent to the global market should not be underestimated.

Climate change has recently made headlines through the record-breaking Australian bushfire which has killed over two dozen, destroyed thousands of properties, and is estimated to have killed more than a billion animals. The firm is rolling out efforts to address the investment risks of climate change. The report also found that 2019 was the second-warmest year on record.

"Climate change-induced extreme weather events (hurricanes, fires, flooding, etc.) can stress insured assets along coastlines, from mortgaged homes and commercial real estate, to small businesses and farms that borrow money", wrote Dayen in November.

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Good questions, but a crucial point he leaves unaddressed is the question of "what will happen to the value of his firm's enormous fossil fuels holdings when awareness of these risks reaches a tipping point, and the carbon-exposed economy is dramatically repriced to the downside?' A fiduciary striving to grow his clients" buying power into the future should be asking that question.

BlackRock announced this week that it would take a tougher stance on companies that aren't providing a full accounting of environmental risks in line with industry standards.

As the Intercept reported in August, Blackstone has provided "significant financing to the world's biggest meatpacker, JBS, which has been caught year after year buying cattle raised on illegally deforested Amazon land", helping to drive Amazon deforestation.

He adds, "Sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors". No, it's not Bernie Sanders, Al Gore or Greta Thunberg. "Who cares if the Saudis are starving millions of Yemeni civilians or that our planet faces a climate emergency?"

The IEEFA said this will lead to the "immediate review and likely divestment" of firms including Whitehaven Coal, New Hope, Yancoal and Adani. "If we become overinflated about the numbers we're managing, we're going to forget our responsibilities and moral objectives", he said.

Spikes in natural disasters, global temperatures and protests against fossil fuels have increased the concerns.

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