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Why the World’s Largest Asset Manager is Divesting From Fossil Fuels

Published on March 4, 2020

Divest or die. That is the thesis of BlackRock CEO Larry Fink’s January letter to his fellow corporate leaders.

According to the boss of the world’s largest asset manager, there is a growing acknowledgement of the scope and scale of climate change that is rapidly reshaping society’s attitude toward both the production, and the use, of fossil fuels. Calls for pension funds and other asset managers to divest from fossil fuels have intensified over the past few years to such an extent that even the biggest names have started to feel the heat.

“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” Fink says, “In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”

With this more climate-conscious future coming rapidly into focus, Fink contends that the smartest course of action that asset managers can take is to divest from coal and other fossil fuel assets.

In Fink’s eyes, divestment is as much about economic survival as ethical business practice. Our publication The Purpose Report 2020 supports this view. We found that Millennial and Gen Z consumers are considerably more ecologically aware than are members of older generations.

The values of these younger generations will have a profound impact on the business of asset management as they take on a greater share of economic activity and wealth creation. Thus, asset managers that do not divest quickly – or at all – will soon run the risk, not only of losing their current clients, but also of alienating potential future clients.

BlackRock has already committed to divesting from thermal coal, and Fink has promised further fossil fuel divestments over time. If Fink is right about investor and consumer sentiments, there is no time to lose.

The Purpose Report 2020 will be published March 9.

Photo by Marcin Jozwiak on Unsplash

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