BlackRock, the world’s largest money manager, will make sustainability and climate risks key tenets of its investing strategy, a move that its chief executive said should push financial institutions to prioritize climate change issues.
But activists noted the firm’s lackluster history on this front and the need for it to push further.
“Climate change has become a defining factor in companies’ long-term prospects,” BlackRock chairman and chief executive Larry Fink said in his annual letter to chief executives. “But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
In a separate letter to investors, BlackRock announced it would exit investments with high environmental risks, including thermal coal, which is burned to produce electricity and creates carbon dioxide, a greenhouse gas. BlackRock will also launch new investment products that screen for fossil fuels.
The nation’s largest financial institutions are under increasing pressure from investors, activists and some political leaders for their tepid response to climate change, even as the Trump administration has systematically rolled back environmental regulations to promote economic growth.
Over the past year, Pope Francis met with chief executives and board chairs of leading oil and gas companies and financial firms, including Fink of BlackRock, and urged them to take steps to curb climate change. Activists have launched a campaign called Stop the Money Pipeline. And investors have flocked increasingly to mutual funds or money managers who screen out shareholdings in fossil fuel companies.
“This is a major, major crack in the dam,” said Bill McKibben, a writer and climate activist who was arrested last week at a protest at a Chase bank in the District. “The financial powers in New York have tried to ignore climate risk, but that’s now impossible; the pressure from activists, and from the climate chaos in the real world, is simply too great.”AD
BlackRock oversees an industry-leading $7 trillion in assets, and its pivot is sure to be closely watched by its competitors …
Many of them have become more transparent — and have marketed select funds that might appeal to customers concerned about climate change. Vanguard said in December that its funds included $319.82 billion in fossil fuel investments. In 103 of its funds, 6,457 fossil fuel stocks made up 8.48 percent of its assets. Only nine Vanguard funds were “A Grade” fossil free.
The investment firm Raymond James estimates that $12 trillion, or 26 percent of all U.S. professionally managed assets, are covered by some kind of environment, social or governance screen. Of that amount, the largest slice — $3 trillion — is centered on climate.AD
In interviews, Fink said the science behind climate change is pushing clients to reassess their long- and short-term investments.
“Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds?” Fink wrote in his chief executive letter. “What will happen to the 30-year mortgage — a key building block of finance — if lenders can’t estimate the impact of climate risk over such a long timeline?”
He said the risks posed by climate change are the most significant he’s seen in four decades of finance. Fink, a Democrat, said he wasn’t acting as an environmentalist but, rather, as a capitalist with a responsibility to clients and investors.
“We don’t have a Federal Reserve to stabilize the world like in the five or six financial crises that occurred during my 40 years in finance,” Fink told CNBC. “This is bigger, it requires more planning, it requires more public and private connections together to solve these problems.”AD
Earlier this month, BlackRock joined Climate Action 100+, an investor initiative to ensure the world’s largest corporate emitters of greenhouse gases act to lessen their carbon footprints. BlackRock joined more than 370 global investors, a group that collectively manages more than $41 trillion in assets.
But BlackRock’s past track record has been weak. Ceres, a sustainability nonprofit, has ranked BlackRock 43rd among 48 asset managers based on its history of backing few climate-related proposals from shareholders. But the group appeared encouraged by Fink’s letter.
“BlackRock is now throwing their weight behind what already exists — a global movement to really addressing sustainability in portfolios,” said the Rev. Kirsten Snow Spalding, senior department director of Ceres’s investor network. “They’re not the first to the party, but just adding their weight is critical.”
One of the companies that has taken a position on climate issues is Goldman Sachs, which in December said it would no longer lend money to oil and gas projects in the Arctic. The bank said it considered climate change and its effects on indigenous people and wildlife. “We will decline any financing transaction that directly supports new upstream Arctic oil exploration or development,” Goldman said. “This includes but is not limited to the Arctic National Wildlife Refuge.”AD
But Goldman hasn’t sworn off all oil and gas investments. Around the same time it issued its environmental concerns, one of its analysts recommended eight oil stocks for investors to buy.
What may be bad for the borrowers of money for fossil fuel investments may not be bad for the financial investment and management business.
Fink said he has increasingly heard from clients worldwide who want to factor climate change into their investment portfolios. And he said he expects a marked generational change as young people increasingly focus on sustainable investing.
Fink said financial investing will have to play a role in “a huge energy transition” over the coming decades. That includes weighing whether fossil fuels, for example, are a good investment both today and 10 years down the line.
“We need to have an organized plan,” Fink told CNBC. “We are not running away from hydrocarbons. We believe they play a role. We believe natural gas plays a very large role in the energy transition. We believe this is a process.”AD
While Fink on Tuesday clearly signaled that BlackRock would not support coal firms, he did not altogether rule out support for oil and natural gas companies. Activist groups said the test would come in the spring when BlackRock will have an opportunity to use its massive stock holdings to vote on shareholder resolutions linked to climate change.
“One key thing we’ll be looking for is how BlackRock changes its behavior in voting season,” said Ben Cushing, a climate campaign representative at the Sierra Club. “For years it held back on holding companies accountable on climate action. Now, it has the opportunity as it heads into annual shareholding season to vote the right way in the companies it has major stakes in.”
“BlackRock is at the same place the Obama administration was a decade ago, with natural gas as a bridge fuel,” McKibben, the climate activist, said. “The science has moved decisively on, and so we will push them hard going forward.”
There is already evidence of a real estate slump in the United States. A housing recession is predicted for 2020. The average price of luxury home sales is falling, as is the number of sales. Long Island specifically is suffering as sales decrease and homes lose value. This is rather astonishing given that the rest of the economy is still on steroids.
What are the reasons? The following have all been suggested.
First, baby boomers from New York are downsizing and moving to lower-tax states. Second, millennials seem to have a distaste for buying second homes and would rather rent. Third, bonuses on Wall Street fell 17 percent in 2018 compared with 2017.
Fourth, the tax changes brought on by Donald Trump: a cap of $10,000 on the amount of state and local taxes (SALT), including property taxes, that can be deducted from federal income tax. For an expensive home with property taxes of $50,000 per year, this means that $40,000 can no longer be deducted.
Fifth, as mentioned by some real estate professionals: chronic flooding, which threatens the values of houses here. According to Aidan Gardiner writing for The Real Deal, a website focusing on New York real estate news: “Chronic flooding threatens to sink the value of Hamptons homes. Hamptons homes are very likely to lose value given that they’ll face chronic flooding as climate changes and sea levels rise over the coming years, according to Bloomberg. Behind only central California, the area has the second-highest level of its property tax revenue at risk among U.S. municipalities with a high likelihood of chronic flooding in the next 12 years. Climate change is expected to bring constant floods that would tank property values, erode infrastructure, and sink tax revenue, all of which will make it harder to fund projects to battle the rising seas.”
You can check for yourself on ss2.climatecentral.org, where you can find a “risk zone map for surging seas.” See the figure appended below. You can input anything from “unchecked pollution” to “extreme carbon cuts,” depending on how you predict future policies will rein in carbon emissions.
I assumed unchecked carbon emissions along the lines of our present-day emissions, and I asked for maps of a 10-foot water level rise. The program produces maps with dark blue shaded areas that will be underwater. Here are some of the highlights for the not so distant future (2050 to 2100).
Montauk will become an island, the Napeague stretch will be underwater, and much of downtown Montauk will be too, including Route 27. Flooding of Route 27 across Napeague will start with just a three-foot rise in sea water levels, shutting down access to Montauk.
Homes all around Accabonac Harbor will be flooded. Gerard Drive and Louse Point will be submerged. Maidstone Park, Sammy’s Beach, and Cedar Point will be gone. Barcelona Point and the Sag Harbor Golf Course will become an island.
Beach homes in Amagansett, homes along Two Mile Hollow Beach, homes around Hook Pond, Georgica Pond, and Wainscott Pond will all be underwater. Indeed, a few homes on Beach Lane in Wainscott will be submerged. That is where the cable from the South Fork Wind Farm is proposed to come ashore and where some of its opponents own property.
Much of Sag Harbor Village will be underwater, and North Haven will be a real island.
Up and down Long Island, the homes close to the South Shore will be underwater, and Fire Island will no longer exist.
The North Shore, too, will be flooded, and Greenport will be on an island.
Kennedy International Airport will be underwater.
It is not just someone else’s problem. Loss of value of high-end homes means loss of significant local business and loss of jobs, and it spills over, resulting in loss of the value of your own property regardless of whether it is in particular danger of flooding.
Showtime’s “The Affair” recently wrapped up its final season, and part of it was set in mid-21st-century Montauk, with warming temperatures and rising seas. The show forecasts what life will look like in 34 short years, including mass transit that routinely short-circuits because of flooding, coastal communities plunged into near-total darkness, and shoreline towns without basic municipal services.
We had better support clean energy (including offshore wind) and work to decrease our carbon footprint. It is urgent.
David Posnett is a member of the Steering Committee of Win With Wind.
Richard DeRose of Wainscott walks his dog at the town beach on Beach Lane in Wainscott, likely site of a cable landing for the South Fork Wind Farm. Dec. 5 Credit: Newsday/Mark Harrington
Thanks for your Dec. 9 news story on the South Fork offshore wind project [“Negotiations over cable”] about talks regarding the landing site of an electrical cable. As a former commissioner of the state Department of Environmental Conservation, I’m no stranger to local opposition to projects like this. But the opposition by Citizens for the Preservation of Wainscott to the cable landing is “not in my backyard” on steroids. I encourage this small group of owners of second homes to reconsider.
The cable landing in Wainscott is preferred because it is the least environmentally disruptive and would affect the fewest people for the shortest period. Unfortunately, despite the need to rapidly move away from fossil fuels, the citizens group is taking an irrational “anyplace but here” attitude. The temporary inconvenience from burying the cable would be minimal, and would occur in the offseason, when most owners of second homes are not around.
Connecting this offshore energy to the Long Island grid is now being reviewed by several state agencies. I believe this time-tested process, along with decisions by local officials, will produce a project that is good for the South Fork, Long Island and the state. I urge citizens of Wainscott to support it. After all, coastal property owners have the most to lose if New York does not lead the way in combating climate change.
Joe Martens, East Hampton
Editor’s note: The writer is director of the New York Offshore Wind Alliance, a coalition of organizations supporting wind power.
By Sarah Kaplan Jan. 1, 2020 at 3:45 p.m. EST. The Washington Post: Science
At the start of the previous decade, Kallan Benson was 5 years old, her favorite story was “The Secret Garden,” and Earth was in the midst of its warmest year on record. Benson had heard about climate change (her mother is an environmental scientist), but she didn’t know world leaders had just signed an agreement calling it “one of the greatest challenges of our time.” She cared about Earth, but she trusted adults to protect it.
She doesn’t feel that way anymore.
By the final year of the decade, the planet had surpassed its 2010 temperature record five times. Hurricanes devastated New Jersey and Puerto Rico, and floods damaged the Midwest and Bangladesh. Southern Africa was gripped by a deadly drought. Australia and the Amazon are ablaze. Global emissions are expected to hit an all-time high this year, and humanity is on track to cross the threshold for tolerable warming within a generation.AD
The 2010s were a “decade of disappointment,” said Benson, now 15 and a national coordinator for the youth climate organization Fridays for Future. If the world is to stave off further disasters, the next decade must be one of unprecedented climate action, she said.
“This decade that we’re going into now will be the most important of our lives,” Benson said. “We’re kind of running out of options. And we’re running out of time.”
Ten years ago, the United Nations released its first “emissions gap” report detailing the disparity between commitments made by nations to reduce greenhouse gases and what is needed to meet global temperature targets. It estimated that countries should be curbing emissions about 3 percent per year.
But that hasn’t happened, said Surabi Menon, vice president for global intelligence at the ClimateWorks Foundation and a steering committee member for the U.N.’s emissions gap reports.AD
“We’ve left ourselves with a very narrow window to take the kind of action that needs to be taken,” she said.
The 2015 Paris climate accord — the first-ever global agreement to limit warming to “well below 2 degrees Celsius” — was important, Menon said. But the promises made at that meeting fell short. According to the latest emissions gap report, temperatures can be expected to rise 3.2 degrees Celsius above preindustrial levels by the end of the century, unless the world’s top emitters increase their Paris commitments.
Right now, most aren’t on track to meet even their most modest targets. The world is already about 1 degree Celsius warmer than it was before humans started burning fossil fuels. Global annual emissions have increased 4 percent since the Paris agreement was signed. And the average concentration of carbon dioxide in the atmosphere — a number that ultimately determines our fate, in the words of Phil DeCola, who chairs the science team for a World Meteorological Organization greenhouse gas initiative — is the highest in human history.
Meanwhile, improved scientific models found that even 2 degrees of warming — once thought to be a reasonable target — could be practically intolerable in parts of the world. To get on track to achieve a less disastrous 1.5-degree temperature rise, a landmark U.N. report found that nations must nearly halve emissions by 2030.
The United Nations’ 1.5-degree analysis provoked widespread alarm after it was published in 2018. Politicians referred to the report at rallies; teenagers quoted it during school walkouts.AD
“If we don’t do something by then,” 14-year-old climate activist Alexandria Villaseñor said in February, referring to 2030, “it will be the end of my world.”
But climate scientists caution against treating 2030 as a deadline and 1.5 degrees as a threshold for extinction.
“Climate change is not a cliff. It’s not a pass-fail course,” Georgia Tech researcher Kim Cobb said. “If we meet the 1.5 target, there may still be tons of ugly surprises. And if we don’t meet it, it’s not that everybody’s going to die.”
According to Cobb, the report is better understood as a road map for navigating the perilous path to sustainability.
“Our decisions over the next 10 years will affect the magnitude of climate change for centuries to come,” she said. “I don’t think it can get more sobering than that.”
The first and most important step will be reducing fossil fuel consumption, experts say. According to the latest emissions gap analysis, the past 10 years of inaction have more than doubled the rate at which emissions must fall; to meet the 1.5-degree goal, emissions must be cut by 7.6 percent each year.AD
Such action would require “unprecedented” transformation of society the report acknowledged.
But many of the solutions needed — both economic and technological — already exist. The report called on the global community to replace coal power with renewable energy, decarbonize transportation and manufacturing, and help developing nations build green infrastructure to meet their growing power needs.
Ending subsidies for fossil fuels could reduce global emissions 10 percent by 2030, the U.N. has found. And eliminating “short-lived” greenhouse gases — including methane, black carbon and fluorinated gases, which linger in the atmosphere less than carbon dioxide but trap more heat — over the next 20 years could help Earth avoid between 0.3 and 0.8 degrees of warming by 2050, research suggests.
Menon draws hope from progress that has been made on the ground in the past decade, even as global leaders fell short. Global renewable energy capacity has quadrupled since 2010, largely because of improved technology and falling costs, she noted. People increasingly see climate change as a threat; a Washington Post poll this year found that 76 percent of American adults view the issue as a “major problem” or a “crisis.” This year’s global climate strikes, led by teenagers such as Benson and Swedish activist Greta Thunberg, were among the largest environmental protests in history.
“We know what we have to do,” Menon said. “And we know there are pathways, there are policies, and there are people willing to do it.”
The rate at which greenhouse gases are removed from the atmosphere must also increase, said Tufts University climate scientist William Moomaw, a contributor to the United Nations’ Intergovernmental Panel on Climate Change. Natural systems currently absorb more than half the carbon people produce, and a 2018 study found that conservation, restoration and improved land management practices could reduce the United States’ net emissions by as much as 21 percent. But cutting down forests, dredging wetlands and polluting the coasts reduce that capacity.AD
“If we don’t actually reverse the rise of carbon dioxide, so that we are lowering the concentrations in the atmosphere, it’s just going to go on getting worse and worse,” Moomaw said.
In the bleak report released this August, the United Nations forecast the consequences of inaction on land. Warming beyond 1.5 degrees will lead to high risk of drought, wildfires, destructive hurricanes and outbreaks of agricultural pests, scientists said. Increased atmospheric carbon dioxide levels could lower the nutritional quality of crops and raise grain prices. Millions will be at risk of losing their homes, livelihoods and lives to natural disasters, and countries will be destabilized by mass migrations.
Many parts of the world are already experiencing this extreme change; a Washington Post analysis this year found roughly 10 percent of the globe has surpassed 2 degrees of warming since the preindustrial era.AD
“The stakes are high. The climate impacts are severe. And people almost everywhere in the world are experiencing that and waking up,” Menon said. “That gives me hope.”
It’s when she considers the political decisions needed to fight warming that she feels pessimistic.
At the recent COP 25 climate talks in Madrid, the world’s leading emitters, including the United States and China, failed to increase their commitments to cut emissions. Officials deferred until next year the task of establishing a global carbon trading system.
“It felt like betrayal,” said Benson, the 15-year-old activist, who lives in Annapolis. “But for me, it means that I have to keep doing what I’m doing. Keep soldiering on.”
On a chilly Friday in December, shivering through her weekly climate strike at the Capitol, the teenager tried to imagine what the next 10 years might look like. But the normal life milestones — dates and dances, college, a job — were hard to picture. Until the global climate outlook changes, Benson can’t envision doing anything but activism.AD
It all depends on what happens to the planet. And that depends on what people decide to do.
Finally, Benson sighed. “I really can’t predict the future,” she said. “There’s so many ways this decade could go.”
Correction: An initial version of this article misstated Phil DeCola’s title. He is science team chair for the Integrated Global Greenhouse Gas Information System, an initiative of the World Meteorological Organization’s Global Atmosphere Watch program.