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BlackRock warns of backlash against firms delaying climate action

Credit: REUTERS/Lucas Jackson

BlackRock Chief Executive Larry Fink has warned company boards to step up efforts to tackle climate change or face increased wrath from investors concerned about how unsustainable business practices might curb their future wealth.

By Sinead Cruise

LONDON, Jan 14 (Reuters) - BlackRock BLK.N Chief Executive Larry Fink has warned company boards to step up efforts to tackle climate change or face increased wrath from investors concerned about how unsustainable business practices might curb their future wealth.

In his annual letter to CEOs, Fink said his firm believed sustainable investing was the "strongest foundation" for client portfolios and a "significant reallocation of capital" was likely in the near future as investors moved to protect returns.

He said BlackRock would exit investments that presented high sustainability-related risk, including thermal coal producers, as it participated in what he described as a "fundamental reshaping of finance".

The intervention from the world's largest investment manager comes at a time when investors are increasingly pressuring financial firms to do more to combat climate change, amid growing public recognition of the dangers.

BlackRock has faced fierce criticism in the past for not doing enough to push the firms it invests in towards sustainable behaviour. Activists in December said they would be monitoring Fink's letter closely for signs of greater engagement with the climate crisis.

BlackRock is also strengthening its commitment to transparency in its stewardship activities, with portfolio managers "increasingly disposed to vote against management" if they felt companies were not making "sufficient progress on sustainability-related disclosures".

"We don't yet know which predictions about climate change will be most accurate nor what effects we have failed to consider. But there is no denying the direction we are heading," the veteran investor said in the letter.

"Every government, company and shareholder must confront climate change."

As well as applying pressure on companies through campaigning, activists in recent months have succeeded in winning over major investors in the financial sector to their cause.

Barclays BARC.L investors, at the urging of lobby group ShareAction, earlier this month submitted a motion that would force the lender to phase out fossil fuel financing faster.

(Reporting By Sinead Cruise, additional reporting by Lawrence White, editing by Iain Withers and Mark Potter)

((sinead.cruise@thomsonreuters.com; 020 7542 5154; Reuters Messaging: sinead.cruise.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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