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Top money manager has companies scrambling to act on climate

Senators use BlackRock CEO Larry Fink’s words against him in urging corporate response to climate change

Elizabeth Warren and three other Senate Democrats are pressing the world’s largest money manager to take greater action to confront climate change after a landmark letter from the firm’s leader rattled corporate America this year.

The letter from BlackRock CEO Larry Fink to chief executives offered unprecedented support from the manager of more than $7 trillion in investments for the notion that companies must look past a narrow view of the interest of shareholders and address social issues including climate change. In the weeks that followed, some of the country’s largest corporations revealed plans to do just that, including a $1 billion commitment by Delta Air Lines, the second-largest U.S. carrier, to become carbon neutral over the next decade.

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With plans rolling out, advocates of corporate accountability for climate change, including lawmakers on Capitol Hill and many shareholders, are pushing Fink to take new actions that would escalate pressure on companies.

In a letter that repeatedly quotes Fink’s own words, Warren, of Massachusetts, and fellow Democratic Sens. Cory Booker of New Jersey, Chris Van Hollen of Maryland and Sheldon Whitehouse of Rhode Island ask Fink to support the Climate Risk Disclosure Act, a bill from Warren that would mandate that public companies report information on greenhouse gas emissions, fossil fuel assets, plans to address climate change impacts and impacts if governments implement policies to limit global temperature rise.

They emphasized the need for standardized information from companies and asked Fink to provide concrete details on how BlackRock will carry out specific commitments from his letter.

“Your letters to CEOs and investors suggest that you understand the extent of the effects that climate change will have on the economy, and that BlackRock, as a fiduciary to your clients needs to understand climate risks across the investments it makes,” the senators said.

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BlackRock is reviewing the senators’ letter, a spokesman told CQ Roll Call.

Warren has previously penned letters to BlackRock leadership, including asking that they press gun manufacturers to help address mass shootings and U.S. gun violence. During her presidential campaign, she spoke about climate change as tied to problems of corruption and corporate influence in Washington, common themes of her unsuccessful bid for the Democratic nomination.

Momentum for action

In Congress, Democrats are introducing waves of legislation that would compel companies to release information on how they’re managing an array of environmental, social and governance (ESG) issues, as well as ESG holistically. Republicans are generally opposing the measures as burdensome to public companies and unnecessary given the requirements that companies already disclose material risks, a mandate that can be subjective.

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Still, some House Republicans moved to back a bill requiring that companies disclose the gender, race, ethnicity and veteran status of board members, board nominees and executive officers. It passed the House but has stalled in the GOP-controlled Senate.

And the Securities and Exchange Commission proposed a rule that would raise the thresholds for shareholders submitting proposals for votes at corporate annual meetings, an effort proponents say will keep unpopular, burdensome requests from reappearing on ballots. Critics, however, say it would effectively block proposals on environmental and social issues that can take years to gain traction but eventually become widely accepted like those on climate change.

With corporate and investor actions on climate change, what’s politically feasible “is being reoriented beneath our feet,” says Sasha Mackler, director of the energy project at the Bipartisan Policy Center, a think tank. There are signals of both shifts in the private sector and among Republicans, he says.

Investors focused on environmental and social issues are entering a new phase in expectations of BlackRock too. Many welcomed Fink’s letter but cautioned they’d be watching BlackRock’s concrete actions to expose inconsistencies.

Proposals submitted for votes at BlackRock’s annual meeting this year ask the company to report publicly on its voting record and policies for climate change-related shareholder proposals; to say how it will consider a broad set of stakeholders that include the environment; and to disclose information on climate-related lobbying. The proposal on BlackRock’s voting record was withdrawn, indicating the shareholder was satisfied with a commitment from the firm.

Now that BlackRock has made public commitments related to climate change, there are specific measures to which the firm can be held accountable, says Sue Reid, vice president of climate and energy at corporate sustainability advocate Ceres. BlackRock risks damaging its reputation if it doesn’t follow through, she adds.

“There’s so much publicly available information for holding the enterprise accountable,” Reid says, “and the asset owners who always have the potential to withdraw their assets from BlackRock or other asset managers if they don’t follow through.”

BlackRock declined to comment on the shareholder proposals or on corporate announcements related to climate change since Fink’s letter.

It is clients that told BlackRock they wanted their dollars invested sustainably and that Fink credited in the letter as an impetus for change. Now the firm is flexing its status among many U.S. companies’ top stock owners.

Delta Air Lines has pledged to become carbon neutral in the coming decade. (John Moore/Getty Images file photo)

Corporate rollouts

Delta was one of several large U.S. companies to unveil climate-related plans in the wake of Fink’s letter.

BP announced a goal of becoming net zero by 2050 and cutting the carbon intensity of products it sells by at least half. The oil and gas company added it would aim to lead on climate-related disclosures, advocate for supportive policies such as carbon pricing and place new expectations on the trade groups where it’s a member.

The largest U.S. commercial bank, JPMorgan Chase, said it will facilitate $200 billion in financing to advance the United Nations Sustainable Development Goals, create an ESG group to advise clients on reducing carbon emissions and investing, and drop business with coal companies. It’s also upping its climate-related activities as an asset manager.

Software pioneer Microsoft pledged to become carbon neutral and then go even farther by removing all the carbon the company has emitted since its founding by 2050.

Delta announced its plan to be entirely carbon neutral by 2030 on Feb. 14, a month after Fink’s letter became public. That timeline would make the Atlanta-based company the first globally operating airline to be carbon neutral throughout its business. Its plan had a start date of March 1.

Fink’s letter is impacting how businesses consider energy both as suppliers and consumers, shape their business strategies and communicate their plans, Mackler says.

“That leadership demonstration from BlackRock I think will definitely trickle down into how companies shape their strategies and how they speak about them,” he says, noting companies want investors to understand and support their plans.

Still, while business leadership can create significant action to mitigate climate change, to scale actions throughout the private sector policymakers may need to act, Mackler says. Companies may be able to achieve disclosure standards on their own, he says, but shifting to a lower carbon economy at large requires policy aid.

The $1 billion commitment from Delta would go toward reducing how much fuel the airline burns through airplane and flight efficiency efforts, developing more sustainable fuels and buying carbon offsets, which would involve funding projects like planting trees or restoring wetlands to boost the earth’s natural filtering of greenhouse gases from the atmosphere.

Delta had already been working on some of these efforts, including buying new, more fuel-efficient planes.

“We are on a journey, and though we don’t have all the answers today, we know that our scale, along with investments of time, talent and resources, will bring meaningful impact to the planet and ensure the sustainability of our business for decades to come,” CEO Ed Bastian said in a statement.

Delta declined to comment on the record on questions from CQ Roll Call seeking comment and clarity on the details of the plan. The airline plans to release more detail on the plan throughout 2020.

Delta’s $100 million per year price tag would represent about 2 percent of Delta’s almost $4.8 billion in profit last year.

The dollar commitment to the plan is low compared to Delta’s emissions, says Daniel Rutherford, program director for marine and aviation at the International Council on Clean Transportation, which provides research to environmental regulators with a goal of mitigating climate change.

Rutherford notes that Delta’s plan offers few details. He says the announcement seemed to be spurred by a combination of strong year-end earnings for the airline and Fink’s letter.

Rough road for transportation

As U.S. emissions fell slightly in 2019, transportation-sector emissions remained flat, according to preliminary estimates from the research firm Rhodium Group. With power emissions dropping, transportation has been the top-emitting U.S. sector for several years.

While the auto industry can turn to near-term options like electric cars to eliminate emissions outright, there’s currently no way for airlines to function without emitting greenhouse gases. That means they can’t be carbon neutral without buying carbon offsets, which some activists and experts criticize as looking good while failing to balance emissions.

“The math matters a lot, and it is even more challenging now than it was historically because of increased climate impacts — more wildfires, more spread of pests and more flooding and drought that can decimate forests,” Reid says of offsets. “So it’s really important to take a hard look at the time horizons and resilience and make sure that the math actually adds up.”

Airlines for America, a trade group representing U.S. airlines and where Bastian is a board member, said in a statement to CQ Roll Call that the industry accounts for 2 percent of U.S. emissions and is working toward fuel-efficient planes, sustainable fuel and greater efficiency. The organization has a goal of cutting emissions to half of 2005 levels by 2050.

As airlines face the problem of climate change, they’re also at the center of impacts from COVID-19 as the novel coronavirus pandemic causes people across the world to stop traveling.  Airlines for America asked for a government bailout and largely received what it sought. The $2 trillion relief package approved by Congress includes $29 billion in loans and $29 billion in grants for air carriers. House Democrats wanted to tie the aid to a requirement that airlines significantly reduce and offset emissions in the coming years, but the Senate didn’t include the provision.

Delta and fellow airlines are targets of The Climate Action 100+, a $40 trillion investor coalition seeking climate action from the largest greenhouse gas emitters that welcomed BlackRock into its ranks as part of a change included in Fink’s letter.

Delta’s goals and dollar commitment are “terrific,” says Reid of Ceres, which helps lead the coalition. “I just want to be very clear that implementation matters enormously.”

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