The Institute for Energy Economics and Financial Analysis (IEEFA) has published a report saying the firm failed to address risk in the non-renewable energy sector, with the losses coming from value destruction and opportunity cost.
Out of the total $132.8 billion, 75 per cent was said to be due to the fund manager’s investments in four companies alone: ExxonMobil, Chevron, Royal Dutch Shell and BP – which have all performed in the last decade, the review noted.
It also recorded a loss of more than $2.9 billion (US$2 billion) from Peabody Energy going bankrupt and more than double that from Cloud Peak Energy, which also collapsed. The asset manager was said to lose more than $28 billion (US$19 billion) on General Electric.
IEEFA also cited the Bank of England, which said there was potentially $29.5 trillion (US$20 trillion) of asset risk involved.
Six of BlackRock’s 18 directors have also worked in companies with strong ties to the fossil fuel sector, the IEEFA reported.
While the asset manager has said it is committed to sustainable investments, the analysis noted 0.8 per cent of BlackRock’s total portfolio is invested in ESG-oriented funds.
Last year, the Coalition for Environmentally Responsible Economies (CERES) reported BlackRock supported 10 per cent of climate-related shareholder resolutions in the US, choosing to side with management in the majority of cases.
The new review from IEEFA noted BlackRock does not disclose the results of its engagement with companies over ESG issues.
Tom Sanzillo, co-author of the report said BlackRock is behind the curve on coal and reading the energy transition.
“BlackRock’s fossil fuel investment strategy, governance, shareholder policies and views on global economic growth would succeed in the 1980s,” Mr Sanzillo said.
“BlackRock is educating its clients to accept decline. Today it would do better getting the energy transition right.
“A diversified portfolio is not an excuse to lose money.”
The report recommends the asset manager institute low-emission index benchmarks across its passive funds as a financial best practice and core principle of asset allocation. It also asks that BlackRock refresh its board to remove any fossil fuel influence, as well as add an independent chair.
Currently, Larry Fink acts as both chief executive and chair.
Tim Buckley, IEEFA director of energy finance studies said as the world’s largest universal owner, BlackRock wields an enormous amount of influence and has an immense responsibility to the wider community.
The investing giant now has $9.5 trillion (US$6.5 trillion) in assets under management.
“If the world’s largest investor makes it clear the rules have changes, then other globally significant investors like Fidelity, Vanguard and Japan’s sovereign wealth fund will rapidly replicate and reinforce these moves, reducing stranded asset risks for all,” Mr Buckley said.
“In our view, it is BlackRock’s fiduciary duty as a global leader to lead.”
Mr Sanzillo added: “Win or lose, profit or loss, a responsible fiduciary asks tough, clear questions.”
“Shareholder reforms should include active engagement to replace the current practice of predominantly voting with the incumbent, usually conflicted management on climate issues.”
The call for exposure to be directed away from non-renewable energy reflects a greater trend in investing, with more than 100 major global financial institutions having introduced policies restricting coal funding earlier this year.
Yesterday, in Australia, CBA alerted the market it would be exiting thermal coal by 2030.
