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* World's biggest investment manager to reallocate capital
* CEO Fink's move follows activist pressure
* Activists hail "major step," call on others to follow
* BlackRock to cut firms that make over 25% of revenue from
coal
(Adds details on proxy voting, portfolio holdings, dateline)
By Sinead Cruise, Lawrence White and Ross Kerber
LONDON/BOSTON, Jan 14 (Reuters) - BlackRock Chief
Executive Larry Fink warned company boards to step up efforts to
tackle climate change, a significant shift by the world's
biggest investment manager, which has faced mounting concerns
about its role as a major fossil fuel investor.
In his annual letter to CEOs posted on the company's website
on Tuesday, Fink forecast a "fundamental reshaping of finance"
and said companies must act or face anger from investors over
how unsustainable business practices might curb their future
wealth.
Fink also said BlackRock would "be increasingly disposed" to
cast critical proxy votes tied to sustainability, and said in a
separate letter to clients that the New York-based firm will by
mid-2020 sell off from its actively managed client portfolios
stakes in companies that derive more than 25% of their revenues
from thermal coal production.
Climate activists hailed Fink's revamped stances, though
some cautioned the asset manager must still back up its new
rhetoric.
"As the biggest financial institution in the world,
BlackRock’s announcement today is a major step in the right
direction and a testament to the power of public pressure
calling for climate action," said Ben Cushing of the U.S.-based
environmental group Sierra Club, in an emailed statement.
A shift in global investing trends has sent trillions of
dollars into passive funds run by investment managers such as
BlackRock and rivals Vanguard Group and State Street Corp,
and bringing all three powerful new leverage on top
corporations.
Diana Best, senior strategist for the Sunrise Project, which
has pressed BlackRock to escalate pressure on fossil fuel
companies or to divest from them, said BlackRock's steps are "a
fantastic start and instantly raises the bar for competitors
such as Vanguard and State Street Global Advisors."
Vanguard and State Street did not immediately respond to
requests for comment. All three companies count clients with a
wide range of political views and have been careful to represent
their actions in terms of investment strategy rather than
politics.
STEWARDSHIP
A Reuters analysis in October found the top index fund
managers rarely challenge company management and
have largely opposed climate change proposals. In 2018 and 2019
BlackRock and Vanguard only backed around 10% of climate-related
shareholder resolutions.
Historically BlackRock has said it lobbies corporate
executives behind the scenes, an approach that critics said
undercuts other climate efforts.
At Exxon Mobil's annual meeting on May 29, for instance,
BlackRock backed all but one of 10 directors up for election and
opposed all but one of seven shareholder proposals, disclosures
show.
Investors have begun to put their money into more
climate-friendly funds, albeit the overall size of the action is
still small. Investments in exchange traded sustainable funds
grew to $20 billion in 2019, according to data from Morningstar,
nearly four times the previous year's record.
BlackRock did not give specific details on which companies
it would divest from or the size of those positions.
Historically even top U.S. coal producers make up just a small
fraction of BlackRock's active fund holdings.
For instance as of May 31 the $861 million BlackRock
Advantage Small Cap Core Fund owned 29,965 shares of
Arch Coal worth $2.64 million.
Banks also have faced pressure to trim fossil fuel
financing. Last week a group of institutional investors in
Barclays filed a resolution calling for it to stop
financing firms not aligned with the Paris climate agreement.
Jeanne Martin, campaign manager at ShareAction, one of the
groups involved with the effort at Barclays, said BlackRock
should give more specific details about its voting.
"If BlackRock is serious about its commitment to phase out
thermal coal, it should use its voting rights to get major coal
financiers to do the same," Martin said.
(Reporting By Sinead Cruise and Lawrence White in London, and
by Ross Kerber and Tim McLaughlin in Boston; editing by Iain
Withers/Mark Potter/Emelia Sithole-Matarise/Jane Merriman)
