January 26, 2021
BlackRock Wants Climate Change Disclosure, ASAP
Larry Fink is sending his annual letter to CEOs this morning. It’s a little later than usual and I’ve been feeling like I was waiting for Moses to come down from the mountain. Based on the signals that BlackRock sent with the Stewardship Expectations it released in December (which, as I blogged on our Proxy Season Blog, said the asset manager would put more companies “on watch” for climate risks), it’s not too surprising that the letter urges companies to disclose their “net zero” business plan and to explain how their board oversees that strategy. But if anyone had any doubts that BlackRock wants that information, this letter should lay those to rest. Here are the high points (also see this NYT DealBook article):
– We are asking companies to disclose a plan for how their business model will be compatible with a net zero economy – that is, one where global warming is limited to well below 2ºC, consistent with a global aspiration of net zero greenhouse gas emissions by 2050.
– We are asking you to disclose how this plan is incorporated into your long-term strategy and reviewed by your board of directors.
– We strongly support moving to a single global standard, which will enable investors to make more informed decisions about how to achieve durable long-term returns.
– Because better sustainability disclosures are in companies’ as well as investors’ own interests, I urge companies to move quickly to issue them rather than waiting for regulators to impose them. (While the world moves towards a single standard, BlackRock continues to endorse TCFD- and SASB-aligned reporting.)
– In addition, TCFD should be embraced by large private companies and public debt issuers
– As you issue sustainability reports, we ask that your disclosures on talent strategy fully reflect your long-term plans to improve diversity, equity, and inclusion, as appropriate by region.
The letter says the lines are blurring between “E” & “S” issues – for example, climate change has a disproportionate impact on low-income communities. So improved data and disclosure are all the more important to understand the interdependence between these topics.
Mr. Fink is also bullish on sustainability investments. In his letter to clients that was also released today, he explained that they’ll be publishing a temperature alignment metric for their funds, implementing a “heightened-scrutiny model” in active portfolios (including potential divestments), launching more sustainability investment products, and “using stewardship to ensure that the companies our clients are invested in are both mitigating climate risk and considering the opportunities presented by the net zero transition.”
NYC Pension Funds to Divest $4 Billion From Fossil Fuels
BlackRock isn’t the only investor focused on climate change. We’ve been blogging about divestments over on the Proxy Season Blog (including pressure on BlackRock). Yesterday, NYC Comptroller Scott Stringer announced that two of the City’s pension funds had voted to divest their portfolios of $4 billion from fossil fuel companies. Here’s an excerpt:
The New York City Employees’ Retirement System (NYCERS) and New York City Teachers’ Retirement System (TRS) voted to approve divestments today and the New York City Board of Education Retirement System (BERS) is expected to move forward on a divestment vote imminently. Securities were identified based on demonstrated risk from fossil fuel reserves and business activity, and the trustees will continue to evaluate risk in their portfolios to determine additional actions as warranted. The names of companies and the final scope of the divestment will be released following the sale of all targeted securities, which will be completed in a prudent manner to achieve best execution. The divestment is expected to be complete within the original five year timeline. The announcement by the Mayor, Comptroller, and Trustees follows an extensive and thorough fiduciary process to prudently assess the portfolio’s exposure to fossil fuel stranded asset risk and industry decline and other financial risks stemming from climate change.
In January 2018, the trustees announced a goal to divest from fossil fuel reserve owners within five years, consistent with fiduciary duty. The Systems retained independent investment consultants who conducted investment analyses showing the risks posed by fossil fuel companies and the prudent nature of the divestment actions adopted by the Boards.
In September 2018, the Mayor and Comptroller also jointly announced a goal of doubling the pension funds’ investments in climate solutions from 1% to 2%, or about $4 billion within 3 years. Climate solutions include renewable energy, climate infrastructure, green real estate, and other investments that will help achieve the goals of the Paris Climate Agreement. The City is on track to achieve this goal.
Tomorrow’s Webcast: “Alan Dye on the Latest Section 16 Developments”
Tune in tomorrow for the Section16.net webcast – “Alan Dye on the Latest Section 16 Developments.” This is our annual co-hosted program with the NASPP, in which Barbara Baksa interviews Alan about practical tips for refining your Section 16 procedures and avoiding pitfalls. Section16.net members can submit questions in advance to adye@Section16.net.
– Liz Dunshee