By Simon Jessop and Ross Kerber
LONDON/BOSTON (Reuters) - Larry Fink, chief executive of the world's biggest asset manager BlackRock (NYSE:BLK), warned the companies it invests in on Tuesday they will need to show a game plan for surviving in a world aiming for net-zero carbon emissions by mid-century.
In his annual letter to the management of companies across the world, Fink said they would also need to make clear how the plan is integrated into the company's long-term strategy and reviewed by the board.
To help investors prepare their portfolios for the transition to a net-zero economy, Fink flagged a number of fresh steps the asset manager would take, including, where possible, publishing scores for how its equity and bond funds are positioned to adapt to global temperature changes.
The focus on companies' net-zero strategies comes as policymakers and campaigners push asset managers to do more to hold companies to account over their climate plans, ahead of the next round of global climate talks in Scotland later this year.
With $8.7 trillion in assets under management, mainly in passive funds, BlackRock has a significant stake in most large U.S. corporations and in many in other countries, giving it much influence over their decisions.
"The world is moving to net zero, and BlackRock believes that our clients are best served by being at the forefront of that transition," Fink said.
"We are carbon neutral today in our own operations and are committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner. No company can easily plan over 30 years, but we believe all companies – including BlackRock – must begin to address the transition to net zero today."
Last month BlackRock called for companies to lay out their plans to reach net-zero emissions by 2050, but Fink's widely-read annual letter will draw more investor attention to the priorities.
Methodologies for measuring temperature alignment are constantly evolving, based on new research and data specific to particular sectors and regions, Fink said in his letter.
The group would also look to incorporate climate considerations into its capital markets assumptions and implement a "heightened-scrutiny model" when deciding which assets to include in its actively managed portfolios.
Going forward, BlackRock would also publish details of the proportion of its assets under management that are aligned with net zero and plans to announce interim targets for the proportion it aimed to be net-zero aligned by 2030.
After telling clients last year that sustainability would be the company's new standard for investing, BlackRock introduced a policy that would see it sell out of some coal companies, although at the time many campaigners said the bar set by BlackRock to exit was not low enough.
Despite pressure to take a more aggressive stance, Fink's letter made no mention of introducing tougher thresholds, drawing criticism from some.
"Larry Fink’s new net-zero commitment could be a positive step if it were paired with concrete and immediate action to stop investing in new fossil fuels. But a year after its first, extremely weak coal commitment, BlackRock has yet to announce a more ambitious policy," said Lara Cuvelier, sustainable investment campaigner at Reclaim Finance.