Geraldine Buckingham, who is BlackRock’s head of Asia Pacific, said in an interview with The Australian Financial Review the thermal coal decision was in the interests of clients.
“This is really about us believing that these companies, given the carbon risk, represent poor sources of long term Alpha and we don’t believe its in our clients’ best interest to be investing in them on their behalf,” she said. Alpha is the mathematical estimate of the amount of return expected from an investment’s inherent values.
“What it means for us is really that climate risk is investment risk.”
“This is not about people’s personal or individual views about environment or, you know, what the right policy responses are, this is really about how do we fulfil our role as a fiduciary to help clients understand how to manage the risk in their portfolio.
“It’s become very clear, I think, in the last few years that climate risk represents significant investment risk in portfolios and I think that the regulators, as well as managers like BlackRock, are saying that this risk in the portfolio is material.”
A defining factor
Mr Fink announced the coal ban on Tuesday in his annual letter to the chief executives of global companies BlackRock is invested in.
This year the letter was almost entirely devoted to climate change and its potential impact on the global allocation of capital.
“Climate change has become a defining factor in companies’ long-term prospects,” Mr Fink wrote.
“Last September, when millions of people took to the streets to demand action on climate change, many of them emphasised the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect.
“But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Mr Fink said the world would see changes in capital allocation more quickly than changes in the climate itself.
“In the near future – and sooner than we anticipate – there will be a significant reallocation of capital,” he said.
Ms Buckingham said as part of BlackRock’s new approach to sustainable investment it will offer sustainable versions of all its flagship passive products, it will double the number of environment, social and governance exchange-traded funds and help index providers expand and improve the universe of sustainable indices.
She said BlackRock would make changes to the way it votes at annual meetings in relation to climate change resolutions as well as revealing its votes on a quarterly basis instead of once a year.
“Our role in investment stewardship is ultimately to work towards maximising the long term value of that shareholding,” she said.
“If we believe that proposals will help us towards that goal, then we may vote in support of them.
“But many of these proposals don’t and where we believe the proposal is limited in terms of the impact it’s going to have on the goal of the long term value creation for the client we reserve the right not to vote with it.”