Key points
- BlackRock's CEO and chair says the energy transition will bring "the greatest investment opportunity of our lifetime"
- However, BlackRock – which holds stakes in many of the ASX 200's biggest carbon emitters – won't be selling out of oil and gas as it believes fossil fuels are needed to reach net zero
- The view has been criticised by climate activists who say it flies in the face of climate science
The boss of BlackRock Inc (NYSE: BLK) – which manages more than US$10 trillion of assets – has vowed the fund manager doesn't plan on selling out of ASX 200 oil and gas companies.
BlackRock has 6% holdings in S&P/ASX 200 Index (ASX: XJO) gas and oil giants Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (AS:X STO).
It also holds stakes in 2 of Australia's 4 biggest emitters, Origin Energy Ltd (ASX: ORG) and AGL Energy Limited (ASX: AGL). (Also noteworthy: Woodside comes in as Australia's ninth biggest emitter, having put out 9.2 million tonnes of carbon in 2019-2020.)
While BlackRock is bullish on decarbonisation, its CEO and chair Larry Fink has ruled out dropping shares due to environmental impacts, instead saying companies need to "pass through shades of brown to shades of green".
Let's take a closer look at why the world's largest fund manager is holding onto its carbon-intensive investments.
Why the $10 trillion fund manager holds the ASX 200's biggest emitters
In Fink's recently published 2022 letter to CEOs, he commented capitalism is not "woke" and BlackRock "does not pursue divestment from oil and gas companies as a policy".
Fink also said the fund believes the fossil fuels will play an important role in decarbonisation, saying:
We focus on sustainability not because we're environmentalists, but because we are capitalists and fiduciaries to our clients…
[T]o ensure continuity of affordable energy supplies during the transition, traditional fossil fuels like natural gas will play an important role both for power generation and heating in certain regions, as well as for the production of hydrogen.
That will likely be music to the ears of shareholders of ASX 200 energy companies, which are being bolstered lately alongside oil prices.
However, the CEO's viewpoint has been criticised by climate activists.
Reclaim Finance campaigner Lara Cuvelier was quoted by CNBC as saying Fink's "opportunistic argument" for including fossil fuels in the energy transition is disputed by climate science. Cuvelier continued:
Given BlackRock's enormous fossil fuel interests, perhaps this truth is just too inconvenient to stomach.
Still, Fink believes the energy transition will create the "greatest investment opportunity of our lifetime" but "divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero".
Additionally, Fink hinted at one area ASX investors on the hunt for unicorns might want to keep their eyes on, and it's not what might be expected. He commented:
The next 1,000 unicorns won't be search engines or social media companies, they'll be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers.
