• $150 billion earmarked for climate-focused funds.
• New guidelines affect both European and US funds.
• Balancing decarbonization with US states’ anti-ESG laws.

BlackRock Inc., the world’s largest asset manager, updated its decarbonization investment guidelines on July 2, allocating $150 billion for funds screened for energy transition risks and opportunities. Though based in Europe, these guidelines could impact US funds, a company spokesperson confirmed.

The new policy expects affected funds to consider shareholder proposals on Scope 3 greenhouse gas emissions and climate-related lobbying activities. This move illustrates the tightrope BlackRock walks to satisfy demands from both European clients focused on decarbonization and Republican-dominated US states with laws against ESG criteria in portfolio decisions. Some states have even banned BlackRock over its climate-risk policies.

In October 2023, BlackRock launched a “climate-transition oriented” private debt fund to meet institutional investors’ low-carbon goals. Despite CEO Larry Fink’s early warnings about climate risks to long-term investments, BlackRock has dialed back its climate engagement recently. The company moved its membership in Climate Action 100+ to a smaller UK subsidiary.

“For clients who have not directed BlackRock to prioritize climate risks and decarbonization as an investment objective, [BlackRock] will continue to undertake our stewardship responsibilities in line with our benchmark policies, with a sole focus on advancing those clients’ long-term economic interests,” the new guidelines state. “This includes considering climate-related risks and opportunities where material to the company’s long-term financial returns.“

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A University of Florida study published in June found that companies proactively managing climate risks are valued higher by investors. BlackRock’s website asserts that “climate risk is financial risk,” supported by a 2023 survey showing 98% of its institutional investors include a “transition investment objective” in their portfolios.

This strategic move by BlackRock highlights its effort to balance global investment priorities, navigating complex regulatory landscapes while addressing climate risks and opportunities.