January 22, 2020 Read More →

New BlackRock coal policy seen as a milestone in divestment movement

S&P Global Market Intelligence ($):

A new policy from the world’s largest asset manager may initially have a limited impact on global coal production, but it marks a significant milestone in the finance sector’s move away from fossil fuels.

Not only is BlackRock Inc. Chairman and CEO Larry Fink moving his company away from fossil fuels, he is also calling on other corporate leaders to take a harder line on climate change. BlackRock is currently a substantial holder in several coal companies, a new S&P Global Market Intelligence analysis confirms. However, many of the world’s top coal producers will not meet the company’s new divestment criteria. A review of recent data shows companies in the coal and consumable fuel sector, including diversified miners, constitute about $18.62 billion of BlackRock’s investments. It has $7.43 trillion in assets under management.

BlackRock is removing companies generating more than 25% of revenues from thermal coal production from its discretionary active investment portfolios. The goal is to eliminate those investments in thermal coal — a sector BlackRock said is significantly carbon-intensive, becoming less economically viable, and highly exposed to regulation — by the middle of 2020.

Top insurers and bankers are increasingly walking away from the coal sector. The move is making it more challenging to finance and service coal operations as cheap natural gas and renewables pose a rising competitive threat to a business model significantly contributing to global carbon dioxide emissions, multiple coal executives warned in recent months.

“This is the most important company in the investment world making a very important, substantive decision that will take time to implement,” Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis, said.

BlackRock might not have much to lose by dismissing coal either. The stock prices of U.S. coal companies have been flailing for years, and global prices for coal remain relatively weak after a significant contraction in 2019. “The focus on thermal coal is financially appropriate given deteriorating financial performance and a decidedly negative outlook,” Sanzillo said.

[Taylor Kuykendall, Ashleigh Cotting and Declan Harty]

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