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BlackRock makes climate change central to its 2021 investment strategy

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BlackRock, the world’s largest asset manager, announced updates to its investment strategy for 2021.

Among the implemented changes, BlackRock said it expects companies to disclose a plan for transitioning to a lower-carbon economy. It also encourages companies to report critical stakeholders and business interests. Finally, it suggests them to improve racial and gender diversity on large corporate boards.

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BlackRock: clean investment strategy

This Wednesday, BlackRock updated its global principles and guidelines regarding its investment strategy. Early this year, BlackRock’s Chairman and CEO Larry Fink said in an annual letter to CEOs, “climate change has become a defining factor in companies.”

In this regard, Fink noted awareness is rapidly changing, and that’s the reason why his Company needed to do “a fundamental reshaping of finance.” The introduced changes reflect the Company’s commitment to climate and diversity.

Among the most recent changes to its 2021 investment strategy, BlackRock expects companies to disclose a plan for transitioning to a lower-carbon economy, report critical stakeholders and business interests, and improve racial and gender diversity on large corporate boards.

According to the CEO and several other people in the industry, investors are increasingly interested in environmentally and socially conscious companies. The world’s largest asset manager is no exception to this trend.

In its 2021 stewardship expectations report, the Company said that amid the Covid-19 pandemic, “investors and others will be looking to see how companies are rebuilding their businesses for long-term sustainability and value creation.”  

BlackRock’s role in transforming the industry

“The changes we have made to our stewardship principles and voting guidelines strengthen our expectations of management and boards in ensuring companies have a sustainable long-term business model.”  

Experts consider BlackRock to be in a unique position. With assets under management close to $7.81 trillion as of the third quarter, the Company has significant influence over investment issues.

Furthermore, and given BlackRock’s size and spread, these new guidelines could be the difference between the slow pace of change at companies and more immediate action.

Jackie Cook, director of sustainable stewardship research at Morningstar, told CNBC the asset manager held a significant stake in approximately 91% of S&P 500 companies.

BlackRock’s willingness to support more resolutions on socially responsible issues, including climate change and diversity, will set the tone for smaller investors, said Cook.

“Where we believe companies are not moving with sufficient speed and urgency, our most frequent course of action will be to hold directors accountable by voting against their re-election,” said the Company in the report.

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