London — BlackRock says it plans to cut its exposure to thermal coal because of concerns about climate change.
The move sends a strong signal to rival firms and miners, but the reality is that so much of BlackRock’s investments are in passively managed index funds that the world’s largest asset manager will still be stuck holding a lot of coal.
CEO Larry Fink wrote in a letter to clients on Wednesday that BlackRock will eliminate companies that get more than 25% of sales from thermal coal from its actively managed investment portfolios by the middle of 2020. There isn’t a long-term economic or investment rationale for continuing to invest in the fuel, he said.
The challenge is that just $1.8-trillion of BlackRock’s $7-trillion of assets under management is allocated to actively managed funds.
“If BlackRock wants to be serious about thermal coal, not only do they need to pressure index providers to remove producers from the indices, they must use their voting power to pressure utilities to align with the Paris agreement,” said Eli Kasargod-Staub, executive director of Majority Action, a non-profit shareholder group. “That will really move the needle on thermal coal.”