NEW YORK — A changing climate means dramatic risks for the world — and for investments too, the chief of the world’s largest investment manager said Tuesday.
To prepare for and protect against those risks, BlackRock CEO Laurence Fink said in his influential annual letter to CEOs that his firm, which manages roughly $7 trillion for investors, will make a series of moves putting climate change and sustainability at the centre of its investing approach.
Among them, BlackRock will cut out investments in some coal producers from some of its portfolios, sharply increase the number of sustainability-focused funds that it offers, and vote against companies at shareholder meetings when they’re too slow in disclosing and mitigating their impact on the environment.
“Climate change has become a defining factor in companies’ long-term prospects,” Fink wrote in his letter, adding that he believes “we are on the edge of a fundamental reshaping of finance” because of it.
Fink predicted that the changes in how capital is deployed will come “more quickly than we see changes to the climate itself,” and “sooner than most anticipate.”
In fact, the shift is already underway.
Investors poured a net $20.6 billion into sustainable funds across the industry last year, nearly quadruple the record set a year earlier, according to Morningstar. Investors, particularly younger ones, increasingly say they want their money invested with an eye toward sustainability. The total dollars are still small relative to the entire industry — investors plugged a total of $413.9 billion into all taxable bond funds last year, while yanking $41.3 billion out of all U.S. stock funds — but the trend is clear and accelerating.
Fearful of losing out on those dollars — and the fees that they produce — investment companies are rushing to meet the surging demand.
BlackRock and other huge asset managers are generally behind smaller competitors when it comes to sustainability, said Danielle Fugere, president of shareholder-advocacy group As You Sow. BlackRock, State Street, Vanguard and others have been criticized for not doing more about the environment. Besides protests outside its Manhattan headquarters, BlackRock has also heard criticism from members of Congress who believe it could better address climate change.
Because of its size and reach, any shift in focus by BlackRock could alter the industry. It is a major shareholder in thousands of companies through its popular exchange-traded funds that track various indexes, as well as its funds run by stock-picking managers. But Fugere said Tuesday’s announcement is only a first step.
“The words are significant, and the words show leadership,” Fugere said. “But that’s not enough. We have to see on the ground action, and we need to see it quickly. There is no time. Australia is burning up. California is burning up.”
The wildfires in parts of Australia and California and other recent disasters have shown big institutional investors that climate change is just as much a threat to their returns in the near term as over the coming decades.
“The physical risks have become so immediately clear and stark,” said Amy Borrus, deputy director of the Council for Institutional Investors, whose members include pension funds, endowments and other U.S.-based asset owners investing more than $4 trillion.
“Many institutional investors will welcome these steps by BlackRock,” she said. “More and more public funds are coming around to the view that sound environmental, social and governance practices are not just about making the world better but about fundamentally creating and preserving shareholder value.”
This approach to investing comes after a yearslong evolution for the industry, which began with simple funds that bluntly excluded stocks deemed as harmful, such as gun makers or tobacco stocks.
Now, fund managers say they they look at environmental, social and governance issues broadly as part of their analysis of any investment. It’s known as “ESG” investing, and proponents say it aids investors’ returns, not just their consciences, because it helps them avoid risky stocks and big potential losses. Companies with poor records on environmental issues are more likely to face big fines, for example.
For all the noise made by Fink’s announcement, the reaction in the stock market was muted on Tuesday. Energy stocks in the S&P 500 were down, but not as much as some other corners of the market. Coal stocks were mixed.
In his letter, Fink said companies and investors have a role to play in the transition to a low-carbon world, but governments will ultimately need to lead the way.
Some movement has begun. The European Union on Tuesday unveiled a plan to dedicate a quarter of its budget to tackling climate change and to help shift 1 trillion euros ($1.1 trillion) in investment towards making the economy more environmentally friendly over the next 10 years. The Europe Investment Plan will be funded by the EU budget and the private sector. It aims to deliver on European Commission president Ursula von der Leyen’s Green Deal to make the bloc the world’s first carbon-neutral continent by 2050.
“It will be interesting to see whether BlackRock’s high profile move will have any impact on policy,” Borrus said. “Government can do much more in the long run on climate change than investment flows.”
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AP Reporter Samuel Petrequin contributed to this report from Brussels.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
