BlackRock CEO Larry Fink announced in January in his annual letter to clients that the asset manager would seek to align its portfolio with a net zero economy. With almost $9 trillion of assets under management, if BlackRock now takes the necessary steps for making its investments compatible with a 1.5°C world, the impact could be enormous.
Embarking on a net zero pathway has immediate implications for BlackRock. As fossil fuel production needs to quickly wind down, it is highly inconsistent for financial actors which have committed to become carbon neutral by 2050 to continue to invest in major fossil fuel developers in 2021, and especially companies involved in unconventional oil and gas development.
Our research reveals, however, that BlackRock is a massive supporter of the tar sands industry, with $75 billion of current holdings in 30 major tar sands production companies planning on developing new reserves. Other than production, BlackRock also currently has $3.7 billion in the three key pipeline companies which still have existing or proposed pipelines to carry tar sands oil out of Alberta (1). The vast majority of BlackRock funds face no exclusion and expose BlackRock massively to the sector.
The tar sands sector is a key example of a sector that is clearly inconsistent with keeping global warming below 1.5°C. The processes for producing tar sands (also known as oil sands) involve highly negative impacts for the climate, the environment, and Indigenous populations, with emission levels between 3.2 and 4.5 times higher than those from conventional oil produced in North America, making it a ticking climate bomb (2).
BlackRock lags far behind other financial institutions when it comes to tackling climate change through the adoption of fossil fuel engagement and exclusion policies. The road to net zero for BlackRock requires consistency in the concrete actions it implements regarding investment rules. The quick adoption of a tar sands exclusion policy, including the commitments outlined below, should be a priority.
Our demands for BlackRock’s active portfolio:
- Align with best practises and stop investing in companies that generate more than 5% of their revenues from tar sands (across the entire value chain, i.e. extraction, processing, refining or transportation activities) – or have more than 5% of their oil and gas reserves in tar sands.
- Exit companies that are expanding the tar sands sector through the opening of tar sands reserves or building of tar sands-related infrastructure, such as pipelines.
Our demands for BlackRock’s passive portfolio:
- At a minimum, commit not to launch any new product that would include companies above the 5% threshold described above or companies expanding the tar sands sector.
- Offer climate friendly funds, based on the criteria described above regarding tar sands companies, as the default option for all clients and investors across all product offerings.
- Regarding companies invested via existing index funds and products, identify tar sands developers to ensure these companies are monitored and BlackRock votes against management as soon as this year, unless the company commits to a net zero target and thus to immediately cease expansion plans in the tar sands sector.