BlackRock’s new policy affects less than 20% of the coal industry

On January 14th 2020, BlackRock’s CEO Larry Fink announced that the company would put sustainability at the center of its investment strategy. He pledged that BlackRock would from now on avoid investing in companies that “present a high sustainability-related risk.” More concretely, Fink announced that BlackRock is “in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25% of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020.”

BlackRock’s policy currently only covers a fraction of the coal industry

The fact that the world’s largest asset manager released a coal policy with a concrete date and threshold is a very promising sign. However, the scope of the policy is still far too limited and further steps will need to follow quickly.

BlackRock’s policy only covers businesses that sell thermal coal and not the companies that actually burn coal. This means that huge CO2 emitters like Germany’s RWE won’t be affected, as the over 80 million tons of coal RWE mines each year are burned in the company’s own power stations. “The biggest flaw in BlackRock’s policy is that it doesn’t address the part of the industry that is the number one source of CO2 emissions: coal plant operators. As long as coal-based utilities like RWE, PGE or Adani stay in the portfolio, BlackRock hasn’t finished its sustainability homework” says Katrin Ganswindt, Climate and Energy Campaigner at Urgewald.

Even some of the world’s biggest coal producers are not affected

Some of the world’s biggest coal mining companies that produce tens of millions of tons a year - like BHP Billiton or the Russian Ural Mining Metallurgical Company (UMMC) - will also remain in BlackRock’s portfolio. This is due to the fact that these companies also sell other metals and ores, which puts their thermal coal share of revenue below 25%.

These examples show why revenue criteria are not sufficient. Effective coal exclusion policies need to also apply absolute thresholds based on the size of a company’s coal operations. “Size matters and this is why investors like the Norwegian Government Pension Fund and France’s insurance giant AXA have adopted policies that exclude companies which have either over 20 million tons annual coal production or operate over 10 GW of installed coal-fired capacity. Policies that don’t cover many of the world’s largest coal players just because they have diversified revenue streams, fall short of what is needed,” says Heffa Schuecking, Director of Urgewald.

BlackRock is still the world’s largest investor in coal plant developers

BlackRock holds bonds and shares in value of over 17 billion USD in 86 coal plant developers. According to research Urgewald released at COP25, it is the world’s largest institutional investor in companies building new coal plants. [1] “Excluding investments in coal plant and coal mine developers should be a no-brainer, but BlackRock’s new policy fails to address this issue,” comments Katrin Ganswindt.

“We hope that Larry Fink’s announcement will help kick off new coal restriction policies across the finance industry. But our advice to investors is not to copy and paste, but to do better than BlackRock! There are currently 746 companies on the Global Coal Exit List and BlackRock’s policy affects less than 20% of them. As long as the world’s largest asset manager still backs the majority of the global coal industry, the problem is not solved. Larry needs to set a date for a complete coal phase-out,” says Heffa Schuecking.

What would make BlackRock’s policy truly impactful?

The following criteria would have to be applied by BlackRock in order to truly move its investments out of the coal industry.

●      Currently, the new policy only applies to actively managed funds. BlackRock should, however, apply the policy across all business lines, including passively managed funds.

●      BlackRock should follow the lead of Crédit Agricole, AXA and others and exclude all coal plant and coal mine developers from its portfolio immediately

●      BlackRock needs to introduce a 25% coal share of power threshold in order to capture utilities (like RWE) and not just coal mining companies.

●      BlackRock needs to set absolute thresholds such as those used by the Global Coal Exit List to capture all of the biggest coal mining and coal power companies.

 

Notes:

[1]: Banks and Investors Against Future: NGO Research Reveals Top Financiers of New Coal Power Development: https://coalexit.org/sites/default/files/download_public/COP25_PR3.pdf