Money news for March/April 2020 

BlackRock divests from coal

In January 2020, BlackRock, the world’s largest asset management fund, announced that it was taking steps to divest from the coal sector.

The company’s CEO, Larry Fink, stated that the firm was ‘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 has assets under management worth a staggering $7.4tn, and is heavily invested in the fossil fuel industry. According to the Guardian, its listed funds contain a total of $87.3bn invested in fossil fuels, with effective management of 1.35bn tons of coal. It also has shareholdings in a number of major UK brands, including Next (10%), Tesco (7%), and Whitbread Plc (5%) which owns Premier Inn.

The news should be seen as a success for campaigners: the world’s largest asset management company setting dated and measurable targets for coal divestment is certainly a step in the right direction.

However, the move does not go nearly far enough.

According to Urgewald, an environmental and human rights organisation, BlackRock’s policy only covers a fraction of the organisation, BlackRock’s policy only covers a fraction of the coal industry because it only applies to companies that sell thermal coal and not those that actually burn it.

Furthermore, as the policy only applies to companies that generate more than 25% of their revenue from coal, it will not apply to some of the world’s biggest coal mining companies, like BHP Billton or the Russian Ural Mining Metallurgial company, as these companies also sell other metals and ores, which keep their coal revenues below 25% of total revenue.

Black Rock’s coal divestment announcement came among a host of other promises, including greater transparency, aimed at accelerating the firm’s sustainability efforts. ‘Our goal is to be the global leader in sustainable investing’, proclaimed Mr Fink. ‘A company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.’

For information about how you can avoid climate changing investments, see our Ethical Investing and Fossil-free Investment Funds product guides. 

UK Pension Funds Failing on Climate Change

A report by the UK Sustainable Finance and Investment Association has found that pension scheme trustees' policies around climate change and other environmental, societal and governmental (ESG) issues are ‘vague and non-committal’, with many failing to comply with their basic legal obligation to publish their policies on these issues.

Following an investigation in 2014 by the Law Commission, which found a common belief among pension fund trustees that considering ESG issues would violate their fiduciary duty to act in the best interests of their beneficiaries, the Department for Work and Pensions developed regulations requiring trustees to publish ESG policies by October 2019.

The aim of these regulations was to encourage trustees to consider factors such as climate change as a fundamental part of their fiduciary duty, alongside maximising monetary return, and not in tension with it.

However, despite the publication of such policies being a legal requirement for trustees, the report found ‘an appallingly poor rate of compliance’, with two-thirds failing to publish any policies at all.

Pension schemes wield power: with an estimated value of £1.6 trillion in assets, UK occupational pension schemes are among the world’s largest investors.

Dramatic changes to how they invest are essential in the fight against the climate crisis.

The report recommends the government should take steps to address this non-compliance, but also notes that one of the biggest barriers to achieving governance improvements in the sector is the fragmented nature of the UK pensions industry.

to find out how you can switch to a more ethical pension provider, see our Ethical Pensions product guide.