Winners and Losers of BlackRock’s Climate Pushback (So Far)

In January, the world’s largest asset manager issued�a
warning shot
that the status quo on climate change is not going
to cut it.

In his annual letter, BlackRock CEO Larry Fink wrote: “We
don’t yet know which predictions about the climate will be most
accurate, nor what effects we have failed to consider. But there is
no denying the direction we are heading. Every government, company,
and shareholder must confront climate change.â€

With more than $6 trillion of investments under management and
influence in boardrooms of nearly 1,800 companies, what BlackRock
says carries big weight across the corporate and political world.
But that weight only hits home if BlackRock follows through
and presses for a response to climate change in boardrooms.

Among its specific pledges, BlackRock said it will divest from
companies deriving 25 percent or more of their revenue from thermal
coal, and press companies to make climate and sustainability
disclosures aligned with Sustainability Accounting Standards Board
(SASB) and the Task Force on Climate-related Financial Disclosures
(TCFD).

Nine months later, is BlackRock following through?

The short answer is yes, even if it has not moved fast or far
enough for climate activists. In the first half of 2020, more than
50 companies felt BlackRock’s wrath over their lack of progress
on climate change, including Chevron, ExxonMobile and German
utility Uniper.

A spokesperson for BlackRock tells GTM that another 191 have
“been put on watch” and can expect pushback in the boardroom in
2021.

Coal, obviously

With multiple investments in thousands of companies split across
dozens of different funds, a comprehensive analysis of every
investment might take a lifetime.

But picking out some important companies can test whether
BlackRock is truly downscaling its coal investments and highlight
where that backing is being redirected.

Coal miner Peabody Energy, for one, has seen its backing from
BlackRock dwindle. In 2018 BlackRock held around 6.3 million shares
in the company; that figure is now down to 5 million.

Peabody’s annual report points glumly at the
negative sentiments
of sections of the financial community.

“Certain banks, other financing sources and insurance
companies have taken actions to limit available financing and
insurance coverage for the development of new coal-fueled power
plants and coal producers and utilities that derive a majority of
their revenue from thermal coal, which also may adversely impact
the future global demand for coal.â€

Peabody warns that such moves could reduce demand for its
products, increase its cost of borrowing and deflate its share
price (which is down more than 70 percent in 2020).

At Peabody’s annual meeting, BlackRock voted against the
re-election of the firm’s health and safety chair, and cited
“insufficient progress with respect to TCFD or SASB-aligned
reporting, specifically around target-setting.â€

Peabody Energy is not alone among coal companies in the
crosshairs. In February, BlackRock owned a 12.8 percent
stake
in Contura Energy, another major coal miner; by August it
had sold a third of those shares.

In order for BlackRock to make good on its divestment promises,
its holdings in companies like Peabody and Contura will need to
continue dropping in the years ahead.

In the case of Uniper, BlackRock said the German utility’s
progress on climate reporting is non-existent and if the entire
board hadn’t resigned after its takeover by Fortum, it would have
voted for all those with sustainability input not to be
re-elected.

Oil companies under close scrutiny

BlackRock’s interactions with Shell this year offer an insight
into its position with the oil and gas sector at large.

BlackRock voted against a shareholder proposal that Shell set
greenhouse gas targets, but only because it felt the company’s
net-zero target for 2050 —
announced in April
— was sufficient for now. BlackRock, which
owned 7 percent of Shell as of earlier this year, has made clear
that its ongoing support is conditional on climate progress.

“We will be monitoring closely the delivery against the
targets set out to date,” BlackRock said in a
note
about Shell’s annual general meeting. “We will hold the
management and board directors to account for lack of progress on
their delivery through future voting on director elections.”

Oil majors with no decarbonization plan clearly have a target on
their back, and even those with such plans are being monitored
closely.

BlackRock says it will be “engaging†with another 110
carbon-intensive companies in late 2020.

The other (green) side of the coin

When it comes to clean energy, BlackRock’s interests are varied,
longstanding and growing. 

BlackRock recently jumped its stake in SolarEdge to 10.3
percent, and it has stakes in Ørsted, Vestas, SunPower, First
Solar and Vivint Solar to name a few. 

BlackRock is the largest shareholder in both German utility
giant RWE and the U.K. and Ireland’s SSE. In the past year, both
RWE and SSE have sold their customer supply businesses and
committed to developing huge portfolios of renewables.

Climate activists are understandably irked by the fact the firm
maintains billions of dollars of investment in fossil fuel
businesses, but less than a year after Larry Fink’s letter,
BlackRock has at least started doing what it said it would.

If BlackRock’s money continues to flow toward companies
accelerating the transition, and it takes some other investors
along with it, the investment giant may win forgiveness for not
divesting on the turn of a dime.

Source: FS – GreenTech Media
Winners and Losers of BlackRock’s Climate Pushback (So
Far)