The Financial Industry should Put Sustainability at the Heart of its Investment

4 Feb, 2020 06:10
source: Singularity Financial

Last month some of the world’s biggest companies signaled that ‘business as usual’ must end. Microsoft’s loud and bold pledge on January 16 was a big moment, but Blackrock’s letter to its clients pledging to put sustainability at the heart of its investment decisions could be a game changer.

Microsoft: Carbon Negative by 2030

While the world will need to reach net zero, those of us who can afford to move faster and go further should do so. That’s why today we are announcing an ambitious goal and a new plan to reduce and ultimately remove Microsoft’s carbon footprint.

By 2030 Microsoft will be carbon negative, and by 2050 Microsoft will remove from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975.

We recognize that progress requires not just a bold goal but a detailed plan. As described below, we are launching today an aggressive program to cut our carbon emissions by more than half by 2030, both for our direct emissions and for our entire supply and value chain. We will fund this in part by expanding our internal carbon fee, in place since 2012 and increased last year, to start charging not only our direct emissions, but those from our supply and value chains.

BlackRock: Climate Risk Is Investment Risk

In a letter to its clients, BlackRock announced a number of initiatives to place sustainability at the center of our investment approach, including: making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening our commitment to sustainability and transparency in our investment stewardship activities.

Over the next few years, one of the most important questions we will face is the scale and scope of government action on climate change, which will generally define the speed with which we move to a low-carbon economy. This challenge cannot be solved without a coordinated, international response from governments, aligned with the goals of the Paris Agreement.

While government must lead the way in this transition, companies and investors also have a meaningful role to play. As part of this responsibility, BlackRock was a founding member of the Task Force on Climate-related Financial Disclosures (TCFD). We are a signatory to the UN’s Principles for Responsible Investment, and we signed the Vatican’s 2019 statement advocating carbon pricing regimes, which we believe are essential to combating climate change.

BlackRock has joined with France, Germany, and global foundations to establish the Climate Finance Partnership, which is one of several public-private efforts to improve financing mechanisms for infrastructure investment. The need is particularly urgent for cities, because the many components of municipal infrastructure – from roads to sewers to transit – have been built for tolerances and weather conditions that do not align with the new climate reality. In the short term, some of the work to mitigate climate risk could create more economic activity. Yet we are facing the ultimate long-term problem. We don’t yet know which predictions about the climate will be most accurate, nor what effects we have failed to consider. But there is no denying the direction we are heading. Every government, company, and shareholder must confront climate change.