How companies are putting the green back in the greenbacks
Well, it’s finally beginning! BlackRock, a firm with about $6.9 trillion in assets, now asserts that sustainability will be a key factor in their future investment strategies. The CEO announced the company will prioritize the climate crisis for their investment decisions moving forward.
BlackRock is shifting capital out of fossil fuels financing and beginning divestment from coal in its actively managed funds. Financial institutions are at last recognizing the risks associated with climate change.
Larry Fink, BlackRock’s money management CEO stated, “The firm would also introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability, and press companies to disclose plans for operating under a scenario where the Paris Climate Agreement’s goal of limiting global warming to less than two degrees is fully realized.”
This is BIG! Environmentalists, religious organizations and investors have sought divestment from fossil fuels. It looks like the dam now has a significant crack in it. When BlackRock, the largest financial institution in the world makes this decision, momentum toward sustainability is gaining speed. Now what about other large financial institutions like Vanguard and State Street Global Advisors?
Economist Mariana Mazzucato argues behind the climate crisis, behind every economic crisis is a crisis in thinking. The transition has begun. Many voices are calling for new thinking about how our economy works.
Demond Drummer, founder of New Consensus says, “We want to transition from an extractive, destructive, exploitative economy to one that affirms life, to an economy that is regenerative, to an economy that honors Mother Earth, honors the sacred—build a living economy, one that affirms life.”
He adds, “A new economic consensus says we will no longer be duped by the mythic invisible hand of the market–a consensus that recognizes that the public sector has a fundamental role to play in shaping markets—energy markets, financial markets, labor markets – to serve the interests of society.”
Not ‘invisible hand’ controlling our economy, but hands of investors over time will drive future financing away from today’s capitalism toward a new ‘moral capitalism’ as Merrill Lynch terms it. Shareholders want to support their communities, address climate change and environment and be more inclusive, not just make profits.
Ceres, a nonprofit organization, has built a business case for sustainability for thirty years. They work to move investors, companies, policymakers and other capital market influencers to take action on four global sustainability challenges: climate change, water scarcity and pollution, inequitable workplaces and outdated capital market systems.
According to their website, they work with over 170 institutional investors to pass historic shareholder resolutions on climate risk at oil and gas companies like Exxon Mobil and Shell and got Apple, Bank of America, and Nike to make 100 percent clean energy commitments. They helped launched the ‘We Are Still In’ coalition of over 3500 investors, mayors, companies, governors, and other leaders after President Trump withdrew from the Paris Climate Agreement.
Their BICEP network (Business for Innovative Climate & Energy Policy) supports increased adoption of renewable energy and energy efficiency; increased investment in a clean energy economy; and increased support for climate change resilience. Perseverance is paying off.
For investment management folks, it’s really about risk. Which companies are establishing policies to take climate risk into account with your investments? Suggested potential winners for industry investments include clean energy, e-commerce, healthcare technology and local manufacturers. Other sectors may struggle like fossil fuels, bonds, and brick and mortar retailers.
Where and with whom should you invest? Who has environmentally focused portfolios? Which companies are the socially conscious companies? Which ones including large banks consider climate risk in their investment policy?
Our largest banks based in Tennessee are First Horizon National Corporation (Memphis) and Pinnacle Financial Partners (Nashville). A web search did not reveal any company policy statements regarding investment decisions that included climate or sustainability risk. Admittedly they’ll tell you personal profits might be lessened if choosing a socially responsible portfolio, but these same companies also always say past performance does not guarantee future outcomes.
Investors should ask to place your investments where climate risk is part of the money management policy. Individual investor demands will move transition more quickly. We need that because waters are rising here, and researchers recorded the temperature last Friday in Antarctica at 65 degrees Fahrenheit—the highest ever since recordings began in 1961.
Sandra Kurtz is an environmental community activist, chair of the South Chickamauga Creek Greenway Alliance, and is presently working through the Urban Century Institute. You can visit her website to learn more at enviroedu.net