Fink’s oil and gas pledge

THE world’s largest asset manager, the $US10 trillion ($14 trillion) BlackRock, has ruled out selling shares in carbon-intensive companies such as those in oil and gas, arguing they have the potential to be “phoenixes” by transitioning to a net-zero world.

BlackRock’s Australian company investments includes a 5.92 per cent stake in gas giant Woodside, valued at about $1.44bn, and 1.5 per cent stake in coalmining giant Whitehaven Coal worth about $45.2m.

“BlackRock does not pursue divestment from oil and gas companies as a policy,” New York-based BlackRock chairman and chief executive Larry Fink says in his latest annual letter to the CEOs of the companies in which his fund invests, released on Tuesday.

“Divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero.”

Mr Fink said “foresighted companies across a wide range of carbon-intensive sectors” were transforming their businesses to reduce their carbon output.

“Their actions are a vital part of decarbonisation,” he said. “We believe companies leading the transition present a vital investment opportunity for our clients.

“Driving capital towards these phoenixes will be essential to achieving a net-zero world.”

Mr Fink’s latest letter does not mention the more sensitive area of coal, where BlackRock has been selling down its stakes in companies but continues to be a significant investor. BlackRock has been under pressure from climate change activists to take a more aggressive attitude to selling down its stocks in fossil fuel industries.

Mr Fink promised to sell most of BlackRock’s shares in coal companies in his letter to clients two years ago. External estimates last year were that the fund manager still holds $US85bn in coal companies around the world.

BlackRock, which offers active and passive or indexed investment options, says it has sold out of all companies with more than 25 per cent of thermal coal from its active investment strategies.

The group also offers clients the choice to exclude coal from its index products. But it says some of its index funds may continue to hold shares in certain fossil fuel companies “because index funds are designed to track the investment results of third-party indexes.”

It says BlackRock did not have the discretion to sell out of certain companies in its index strategies, but it did offer clients a choice “through the industry’s largest ESG index offering”.

Mr Fink said the change to net-zero carbon emissions would “not happen overnight”.