BlackRock is accused of “greenwashing” $85 billion in coal investments

BlackRock (BLK), the world's largest asset manager, has been accused of “greenwashing” its investment activities in a report that says the company has invested up to $85 billion (£62.1 billion) in coal.

NGOs Reclaim Finance and Urgewald released a report on Wednesday saying BlackRock has invested $85 billion in companies on the Global Coal Exit List. The list, compiled by German organization Urgewald, includes companies from around the world that are involved in some form in the coal industry.

The report's findings come a year after BlackRock CEO and Chairman Larry Fink announced in a letter to clients that sustainability would become the company's “new investment standard.”

“There is no denying the direction we are heading in,” Fink wrote in his annual letter. “Every government, every company and every shareholder must face up to climate change.”

BlackRock has since abandoned all actively managed investments in companies that make more than 25% of their money from coal, and instead offered clients a range of new “ESG” (environmental, social and governance) fund options. Investments in “sustainable” assets are up 41% compared with 2020, BlackRock says, and the firm has pushed hundreds of companies to develop green plans for the future.

READ MORE: BlackRock promises to tackle climate change: “Climate risk is investment risk”

But Reclaim Finance and Urgewald say BlackRock is not going far enough or fast enough. Lara Cuvelier, a sustainable investment campaigner at Reclaim Finance, says Fink's letter amounts to “greenwashing” – that is, pretending that companies are more environmentally friendly than they actually are.

“One year later, it is hard to see anything other than greenwashing in Larry Fink's commitment to sustainability,” Cuvelier said in a statement.

“If he really wants BlackRock to be a climate leader rather than just a climate pariah, he needs to start walking the talk and channeling BlackRock's enormous financial muscle toward a sustainable future.

“After the hottest year on record, the bare minimum for BlackRock is to exit coal once and for all.”

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READ MORE: Investors urge HSBC to exit the coal industry

Coal is a fossil fuel and one of the biggest contributors to climate change. BlackRock has publicly stated that it will no longer invest in companies that use coal – one of the most environmentally damaging types of coal – but critics say the exemptions from the rule only affect a fraction of the industry. Coal-fired power plants, for example, are exempt from the investment ban. The report by Reclaim Finance and Urgewald estimates that the ban only affects 17 percent of the coal industry.

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“To effectively exclude the coal industry, BlackRock should drop all companies that plan to expand existing or build new coal infrastructure,” said Katrin Ganswindt, financial campaigner at Urgewald.

“At a minimum, companies with coal accounting for 20% of sales and 20% of electricity production should be excluded from BlackRock's portfolios. Finally, BlackRock must set a concrete exit date for all coal investments.”

BlackRock is the world's largest asset manager, managing over $7 trillion in assets. About two-thirds of these are managed through passive index funds, which limits BlackRock's ability to sell its investments on climate criteria.

“We believe that climate risk is an investment risk,” BlackRock said in a statement. “We call on all companies to disclose how their business model is consistent with the transition to a low-carbon economy. Where we do not see sufficient progress, we take appropriate reconciliation measures.”

BlackRock pointed to recent votes against companies such as PGE, Uniper and Fortum. In a recent climate update, it said 244 “climate-intensive” companies were at risk of being voted against by BlackRock if they did not make “significant progress on climate.”

Financial firms are facing increasing pressure from interest groups over investments in environmentally harmful industries. Barclays (BARC.L) faced a successful pressure campaign from climate groups last year and activist organization ShareAction recently launched a similar campaign against HSBC (HSBA.L).

A Morningstar report in October found that BlackRock voted against investor sentiment resolutions 80% of the time last year.

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