BlackRock CEO on Climate Risk

Published on 11 May 2021 at 08:07
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The issue of climate and risk has risen prominently in discussions on many fronts and for good reasons, in my humble opinion. Having dipped my toe to in this policy issue so many years ago that I will refrain from given readers an actual carbon date. Suffice to say that back in the good old days, climate or climate change or global warming was heating up in policy circles throughout Washington, DC much the way it is now, once again. My view at the time was that moderation, political and economic realism, sensibility and a clear head should prevail above all. I still very much subscribe to that view, though in some  quarters, I suspect, holding that view is nothing short of tyranny. Recently, I was heartened to read a brief interview (McKinsey) with BlackRock CEO Larry Fink. For those who may not know, BlackRock is the world's largest asset manager, with $8.67 trillion in assets under management as of January 2021.

According to Fink, investors, for the most part, have no intention of of abandoning hydrocarbons in their portfolio but they do want one that will be "more persistent in a more sustainable way." Investors, again, according to Fink, "are going to look to us to be actively investing and searching for a better portfolio composition with higher sustainability or ESG [environmental, social, and governance] scores." That’s where BlackRock sees huge movement. 

Fink, very clearheadedly argues that to believe that we can stop using coal today, is basically foolhardy. He is right, of course. We know there are more coal plants being built in countries around the world. One of those little inconvenient truths we'd rather not mention in polite society but it is happening. Fink, argues that the answer "is not to think that we can just run away from coal worldwide. It is to create better science and technology to find ways to help make coal cleaner." I could not put it any better way than that and it goes right tom my views of moderation, political and economic realism and sensibility that I noted above. 

What hit me over the head like a two-by-four, was when Fink notes quite rightly that "there are many parts of the world that are just beginning their growth curve and their wealth creation. It’s very hard for us to be judging them on their economic path. And there lies the problem. We could do all that we are potentially able to do, and even that will not be enough, because so many other parts of the world are just adding more and more carbon to our air. That’s not going to change anytime soon. So we need to be fair and just. We need to be open-minded." I have been arguing that point for some time especially when we talk about climate, sustainability and the developing nations. For the U.S. to point a judgmental finger "j'accuse!" towards developing nations for their carbon misdeeds, is at the very least, irresponsible. 

#climaterisk #coal #investment #ESG #hydrocarbons #developingnations



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