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Measuring climate investment risk is capitalism

Larry Fink, CEO of BlackRock Inc.

Christopher Goodney | Bloomberg | Getty Images

Billionaire businessman and former New York Mayor Michael Bloomberg and investment giant BlackRock both recently released their own strongly worded missives defending investment in climate solutions and clean energy and claiming that asking companies to disclose climate-related risks is smart capitalism.

The letters come as political pressure mounts against the idea of ​​environmental, social and governance (ESG) funds, which claim to give people an easy way to invest in companies that act responsibly in these areas. Critics, particularly on the Republican side, have said ESG is a cover for a political agenda and is partly aimed at fossil fuel producers.

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Bloomberg, who is currently worth nearly $77 billion according to Forbes, published an op-ed in his eponymous media publication on Tuesday mocking Republican-led efforts to politicize investment decisions in climate solutions and clean energy.

“In a world rapidly moving toward clean energy, companies that rely on fossil fuels pose greater risk to investors,” Bloomberg wrote.

“The fact is, climate risk is financial risk. The costs of climate-related weather events now exceed $100 billion a year – and that only counts insured losses,” Bloomberg wrote. “Reporting these and other losses is not social policy. It’s a smart investment. And refusing to allow companies to do so comes at a significant cost to taxpayers.”

On Wednesday, BlackRock sent a letter to a group of attorneys general that defended its commitment to measuring corporate climate risk and investing in clean energy as responsibly discharging its fiduciary duty to customers.

“Our commitment to the financial interests of our clients is unwavering and unwavering,” wrote Dalia Blass, Senior Managing Director and Head of External Affairs at BlackRock.

“Governments representing over 90% of global GDP have committed to net zero in the coming decades. We believe that investors and companies that take a forward-looking stance on climate risk and its implications for energy transition will drive better long-term financial results,” Blass wrote. “These opportunities cut across the political spectrum.”

Former New York Mayor Michael Bloomberg speaks during a meeting with Earthshot Prize winners and finalists at the Glasgow Science Center during the United Nations Climate Change Conference (COP26) in Glasgow, Scotland, Great Britain. Brittany, November 2, 2021.

Alastair Grant | Reuters

BlackRock’s letter specifically responded to an Aug. 4 letter from 19 state attorneys general to BlackRock CEO Larry Fink in which they objected to what they called an anti-fossil fuel bias.

“BlackRock’s past public engagements indicate that it has used citizen assets to pressure companies to comply with international agreements such as the Paris Agreement that mandate the phasing out of fossil fuels, increase energy prices, drive inflation and weaken the national security of the United States,” the attorneys general say.

Specific state lawmakers passed legislation for their own states “prohibiting energy boycotts,” the attorneys general’s letter said. For example, later in August, Texas Comptroller Glenn Hegar accused 10 financial firms, including BlackRock, and 350 investment funds of taking steps to “boycott energy companies.”

BlackRock has opposed the idea that it is boycotting energy companies or operating with a political agenda.

BlackRock is “one of the largest investors in public energy companies” and has invested $170 billion in US energy companies. Recent investments include natural gas, renewables and “decarbonization technology that needs capital to scale,” BlackRock said in its letter.

BlackRock also said it is asking companies for climate-related financial information to improve transparency and be able to make quality investment decisions for clients.

Bloomberg, meanwhile, said measuring climate risk is just a basic investment.

“Any responsible fund manager, especially one with a fiduciary duty to taxpayers, seeks to build a diversified portfolio (including energy); identifies and mitigates risks (including risks associated with climate change); and considers the macro trends that shape industries and markets (like the steady decline in the price of clean energy),” Bloomberg wrote.

“It’s investing 101, and either the Republican critics of ESG don’t get it, or they’re serving the interests of fossil fuel companies. It could well be both.”

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