- BlackRock, the world's largest asset manager, is centring its investment strategy around climate change – but it's unlikely to affect many of the largest thermal coal producers.
- Glencore and BHP, for example, which between them export hundreds of millions of tonnes of the stuff from Australia are not at any risk of losing BlackRock's support because their total coal revenues are below BlackRock's 25% threshold.
- BlackRock stands by the conditional withdraw from coal, telling Business Insider Australia that its investment strategy is motivated by investment risk, not by social or political pressures.
- Visit Business Insider Australia’s homepage for more stories.
The world's largest asset manager's new environmental strategy has created big waves.
BlackRock's announcement on Tuesday that climate change would be the focus of its new investment strategy signalled it would exit investments with "high-sustainability-related risk" like thermal coal producers.
"While government must lead the way in this transition, companies and investors also have a meaningful role to play,” CEO and chairman Larry Fink said in his annual company letter. “Every government, company and shareholder must confront climate change."
Those kinds of words probably require a trigger warning in Australia, a country which has struggled for decades to find any kind of political consensus around the question of a clean energy transition. But while this new message from BlackRock – which controls an extraordinary $US7 trillion ($10 trillion) of the world's wealth – might seem enormously significant for world's second-largest thermal coal exporter, it looks unlikely to change a whole lot.
That's because if you begin digging under the hood, it becomes quickly apparent that BlackRock's strategy isn't as revolutionary as it first appears. It has effectively given itself a get-out clause which only means divestment from companies that derive 25% or more of its sales from thermal coal.
Ironically, this precludes many of the world's largest producers of coal. It turns out that mining companies that produce an enormous amount of coal also produce an enormous volume of other minerals, and thus avoid BlackRock's ire.
Take Glencore for example, by far the single largest thermal coal player in the world, with 11 mines along Australia's eastern seaboard. In 2018, it produced about 130 million tonnes of the stuff globally. That one literal mountain of coal, however, accounted for less than 10% of its total revenues, meaning BlackRock's 6% stake in the mining titan is safe as houses.
Or how about $160 billion mining giant and Australia's largest listed company, BHP. Alongside Mitsubishi, it owns 50% of BMA, responsible for more Australian coal exports than any other company. In total, BHP received around $2.25 billion worth of the stuff in 2019, produced from its Australian mines in New South Wales and Queensland. Given its huge iron, copper and petroleum interests, it too will be exempt from any pressure from BlackRock.
While not wishing to comment directly, a BlackRock spokesperson told Business Insider Australia its new strategy was based entirely on investment risk, not political or social pressure. It's appropriate then, the asset manager says, to assess company exposure to thermal coal rather than its participation period.
The stance strikes a significant contrast to the similar decision made by Norway's $1.5 trillion Sovereign Fund which divested miners producing more than 20 million tonnes of thermal coal annually. In other words, Glencore and BHP.
Nor will BlackRock's decision placate its critics. Environmental activist group Extinction Rebellion wholly refuted the impact of its divestment strategy.
"It’s not always the case that something is better than nothing, particularly if it’s used to distract from the truth. And the truth is that the world’s biggest miners and polluters will not be losing any sleep over this," it said in a statement.
"BlackRock remains waist-deep in fossil fuel investments and the world’s top backer of companies that destroy the Amazon rainforest and ignore the rights of indigenous people."
According to environmental activist group Majority Action, in 2019 it overwhelmingly voted against company climate action resolutions, supporting just five of 41. Of the 36 it rejected, its support instead would have seen at least 16 pass.
Its decision earlier this week to join influential investor group Climate Action 100+, made up of other heavyweights like AustralianSuper – the country's largest super fund – and US bank WellsFargo indicates some change of heart.
But with its enormous ongoing exposure to oil, gas, and – yes – coal, its commitment to its namesake appears unwavering.