2021 ushers in a new Administration in the US, whose leader declared on his first day in office the importance of Climate Change and that the US will quickly re-enter the Paris Accords and attempt to be a leader in the movement. Perhaps an even stronger movement for addressing Climate Change has happened gradually over the last couple of years, the movement of major corporations and money managers to understand the business risks of Climate Change and the need to address the issue. Laurence Fink, the head of the major global money management firm, BlackRock, which manages about $9 trillion, wrote letters to the world’s C.E.O.s with the urgent message that Climate Change will be “a defining factor in companies’ long-term prospects.” And “We are on the edge of a fundamental reshaping of finance.”
The letter had a quick impact, as a number of major firms developed and communicated strong Climate Change goals within months, such as Microsoft becoming carbon negative by 2030 and Delta Air Lines, impacted greatly like the whole airline industry by the pandemic, announcing its goal to be carbon neutral in 10 years even though they believe this to be a $1 billion effort.
The COVID-19 pandemic could have been an excuse to ignore these warnings about Climate Change and encouragement to be sustainable, but instead investment in companies perceived to be “green” or will help others be more sustainable grew, such as sustainability-oriented mutual funds. This is making “green” investing more profitable.
Mr. Fink went further, requesting companies develop specific plans to reduce greenhouse gas emissions greatly and be more sustainable, hinting that BlackRock may shift investment monies or even request changes in leadership of companies that are not sufficiently engaged in the process.
BlackRock is looking to develop a metric for public equity and bond funds to evaluate their companies and whether they have feasible, explicit Climate Change goals and the degree funds invest their money in “green” or in fossil fuel enterprises. For example, a number of large pension funds have, in recent months, divested billions of dollars from fossil fuel-oriented assets.
Mr. Fink’s letters have encouraged companies to plan for and work toward achieving net-zero greenhouse gas emissions by 2050. While achieving net-zero is terrific, this cannot be achieved without purchasing carbon offsets, investing in greenhouse gas emission reductions elsewhere. Unfortunately, the carbon market system is currently sketchy with few reliable auditing programs to confirm whether the reduction was really achieved and will continue in the future. This needs to be addressed.
The BlackRock letters have been criticized as showcase marketing, a shield against future actions, and hypocritical (BlackRock still invests tens of billions of dollars in coal-related companies). However, they certainly have and will have the impact of changing the topic of conversation in major corporations to seriously discuss their sustainability and Climate Change programs with serious planning and execution. Certainly if “big money” joins the movement to be more sustainable and properly address Climate Change, this will have a major positive impact on the movement worldwide.
CCES has the experts to help your company assess its greenhouse gas emissions and develop strategies to not only lower your your “carbon footprint” economically, but incorporate other sustainability operations to further save costs, improve efficiency, and benefit the planet. Contact us today at karell@CCESworld.com or at 914-584-6720.