BlackRock, the world’s largest asset manager, will make climate change central to its investment decisions going forward.
Founder and CEO Laurence Fink, who oversees the management of about seven trillion US dollars in funds (£5.38 trillion), said in his influential annual letter to CEOs on Tuesday that he believes we are “on the edge of a fundamental reshaping of finance” because of a warming planet.
Climate change has become the top issue raised by clients, Mr Fink said, and added it will affect everything from municipal bonds to long-term mortgages for homes.
The New York firm is taking immediate action, exiting investments in coal used to generate power, and it will begin asking clients to disclose their climate-related risks.
The shift by BlackRock is substantial. The firm has long been a target of environmental activists who have staged protests outside its headquarters in Manhattan.
It has been hounded by some members of US congress who believe BlackRock could better address climate change with its vast economic heft.
Because of its size and reach, any shift in focus by BlackRock has the potential for much wider ramifications. The firm has operations in dozens of countries and is often called the world’s largest shadow bank.
Mr Fink wrote: “Over time, companies and countries that do not respond to stakeholders and address sustainability risks will encounter growing scepticism from the markets, and in turn, a higher cost of capital.
“Companies and countries that champion transparency and demonstrate their responsiveness to stakeholders, by contrast, will attract investment more effectively, including higher-quality, more patient capital.”