The world's largest asset manager, BlackRock Inc., published updated decarbonization investment guidelines July 2 and earmarked $150 billion in funds that will be screened for energy transition risks and opportunities.
The funds are based in Europe, but the new guidelines could affect BlackRock funds in the US, a company spokesperson confirmed.
BlackRock will expect the funds affected by its new climate policy to consider shareholder proposals that, for example, ask a company to disclose Scope 3 greenhouse gas emissions or climate-related lobbying activities, the company said in its update.
The new stewardship guidelines illustrate the tightrope BlackRock walks as it tries to satisfy demands from both sides of the Atlantic. The company, which has $10.5 trillion under management, must balance European clients focused on decarbonization alongside Republican-dominated US states with laws against weighing environmental, social and governance criteria in portfolio decisions. Some of those states have banned the company over its climate-risk policies.
In October 2023, BlackRock launched a new "climate-transition oriented" private debt fund to meet the growing needs of institutional investors that set low-carbon and climate transition goals for their portfolios.
BlackRock, whose CEO Larry Fink was one of the first in the industry to warn about the risk climate change can pose to long-term investments, dialed back its climate engagement in recent years. Earlier this year, BlackRock also moved its membership in the influential financial network Climate Action 100+ to a smaller subsidiary in the United Kingdom.
"For clients who have not directed BlackRock to prioritize climate risks and decarbonization as an investment objective, [BlackRock] will continue to undertake our stewardship responsibilities in line with our benchmark policies, with a sole focus on advancing those clients' long-term economic interests," the new guidelines said. "This will include consideration of climate-related risks and opportunities in a company's business model, where material to the company's ability to deliver long-term financial returns."
A recent analysis of earnings transcripts from nearly 5,000 publicly traded US companies by University of Florida researchers found that companies that proactively manage climate risks are valued higher by investors than those that do not. The study was published in the Review of Financial Studies journal in June.
On its website, BlackRock says that "climate risk is financial risk." A 2023 survey of 200 BlackRock institutional investors worldwide showed that 98% include a "transition investment objective" in their portfolio.