Investment zeitgeist shifts again as Blackrock’s Fink raises ante for fossil fuels

TUESDAY’S announcement by global asset managers BlackRock, which manages the $4.8 trillion World Mining Fund, that it will not in future invest in debt or securities of companies earning more than 25% of revenue from thermal coal is neutral for the shares of the world’s biggest diversified miners.

However, the aversion of the largest asset managers to thermal coal is likely to influence other investors, limiting appetite for shares or debt of thermal coal-focused mining companies over time. Already smaller coal miners such as Exxaro Resources and Kibo Energy have started to diversify their interests into renewables projects.

At the end of December, the BlackRock World Mining Fund (which has a current value of $4.8 trillion) had an 8.99% weighting towards BHP Group, 8.18% towards Rio Tinto and 6.96% towards Anglo American. But none of those companies earns more than 25% of its revenue from thermal coal.

Glencore is not listed among the fund’s top ten holdings, but on 10 December Glencore announced BlackRock’s holding in the group had fallen below 5%. Glencore also does not earn more than 25% of revenue from thermal coal and recently said it would be capping its thermal coal output at approximately current levels.

BlackRock said it intended to ensure its discretionary portfolios had sold out of companies earning more than 25% of revenue from coal by mid-2020. It would “closely scrutinise” other businesses that rely on thermal coal as an input to evaluate whether they are moving away from it.

BlackRock chairman and CEO, Larry Fink, said in his annual letter to CEOs the firm will also be “increasingly disposed” to vote against management and directors of companies that are not making enough progress on sustainability-related disclosures.

“In the future, greater transparency on questions of sustainability will be a persistently important component of every company’s ability to attract capital,” he said.

BlackRock’s new positioning was welcomed by environmentalists, particularly, one of the leading climate change movements.

“Although it may sound wildly incremental and, well, underwhelming given the climate crisis, this announcement changes things for the climate movement, and may have a significant impact on the finance world, especially the fossil fuel industry,” said.

It said over 100 “globally significant” financial institutions had announced divestment from coal to date.

“BlackRock’s announcement helps establish climate risk as a mainstream risk management issue,” the organisation said.