About a year ago, the world's largest asset manager BlackRock Inc. (NYSE:BLK) declared its intention to increase its ESG (Environmental, Social and Governance) investments more than tenfold from $90 billion to a trillion dollars in the space of a decade. Few took the investment firm seriously, given its spotty track record on climate action in the past.
But just in case investors thought BlackRock was bluffing as usual, the company recently issued a chilling update on its approach to engaging with companies, essentially saying it will abandon its traditional modus operandi of siding with boards of directors at companies but will instead start favoring shareholder resolutions.
Blackrock manages $7 trillion in global funds, making it the world's largest asset manager.
Exxon Slammed
Coincidentally, four years ago, when the climate pressure was a lot less, former Bank of England Governor Mark Carney admitted that the world would need at least $7 trillion to fund global carbon reduction commitments if we are to meet our climate goals.
And BlackRock has been looming large over oil and gas companies planning to go on with business as usual despite the mounting evidence of a disturbing global climate.
In the past week, U.S. oil giant Exxon Mobil Corp. (NYSE:XOM) was targeted by angry activist investors as well as CalSTRS (California State Teachers' Retirement System), one of the country's s largest pension funds.
But it did not stop there.
New York State's $226 billion pension fund recently announced plans to divest from oil and gas stocks in the coming years.
Exxon has been slammed for its half-hearted commitment to lowering its carbon and greenhouse gas emissions. Just days ago, Exxon joined the rapidly growing number of U.S. oil and gas producers that have promised to cut greenhouse gas emissions. Unfortunately, activists and analysts have mostly lambasted Exxon's announcement as "underwhelming," "inadequate" and "baby steps."
"A 15%-20% reduction in greenhouse gas emissions intensity over nine years is not an ambitious target - it's essentially business as usual," said Raymond James energy analyst Pavel Molchanov.
"What's really lacking from [Exxon's] announcement is there's nothing about capex or strategy or investment. It's all sort of tinkering around the edges," said Andrew Logan, director of oil and gas at Ceres, a sustainability nonprofit that works with investors on climate change.
Meanwhile, Engine No. 1, one of the shareholder groups engaged in an activist campaign to shake up the company, has concurred saying, "...while reducing emissions intensity is important, nothing in Exxon Mobil's stated plans better positions it for long-term success in a world seeking to reduce total greenhouse gas emissions."
Last week, Ceres announced a consortium of investors managing $9 trillion in assets that has fully committed to investing along with net-zero carbon goals.
ESG Momentum
Indeed, there's no denying that ESG investments are rapidly gaining momentum with investors actively demanding environmentally and socially responsible choices.
Indeed, over the past half-decade, ESG (Environmental, Social, and Governance) investing has emerged as the single biggest global megatrend. Even the Big Banks are feeling the ethical squeeze keenly.
ESG inflows have been killing it this year, hastened exponentially by the COVID-19 pandemic, and showing no sign of backing off even once we have a vaccine. Life will not return to normal in the world of finance, and this is shaping up to be the biggest transfer of wealth we've ever seen.
Sustainable investing assets now total $17.1 trillion. That's up 42% just from 2018.
Within a year, 77% of institutional investors will completely stop buying products that aren't in some way sustainable, according to PwC.
Blackrock itself says its clients will double their ESG assets in just five years.
In fact, money managers say climate change is their No. 1 concern and the "leading criteria" determining where they put their money to work.
From EVs and renewable energy stocks to hydrogen stocks and even graphene stocks, the ESG trend is truly having its moment in the sun.
On its part, BlackRock has been outstanding, with the firm now managing more than $7 trillion while the stock has gained nearly 40% YTD.
And this isn't about morals or ethics. It's about the free market. Sustainable stocks are outperforming everything else because they are the new safe haven--one that makes money while de-risking from the looming climate threat.
