The heavy hitter at the top of the world’s largest asset management firm says it’s a “bad answer” for investors to abandon oil and gas, and it won’t help solve climate change.
“Nothing’s more greenwashing than divestiture, because it doesn’t change the footprint of the world,” BlackRock CEO Larry Fink told a recent virtual conference hosted by the MIT Golub Center for Finance and Policy.
“We’re not going to get to this decarbonized world that we wish if we don’t invest in technologies and industry that rapidly change our carbonized world to a more decarbonized world. But it’s a lot more complex than just having a bunch of investors moving out of some hydrocarbon companies.”
Fink pointed to the surge in global oil demand underway as nations recover from the COVID-19 pandemic, paired with cost inflation due to underinvestment in oil resources.
“In America today and throughout the world we are seeing rising energy costs. We’re seeing inflation that is being created by environmentalism because we are changing supply without changing demand,” he said.
Strategies to choke off oil and gas supply from publicly traded companies only cause the assets to change hands, often into the control of less transparent actors that are not as committed to environmental improvement, Fink said.
“If a foundation, or an insurance company, or a pension fund says, ‘I’m not going to own any hydrocarbons,’ well, somebody else is. So you’re not changing the world. My view is it is those pension funds, foundations and endowments actually should have a loud voice with companies to move forward,” he said.
According to Canadian non-profit InvestNow, in the last decade 1,485 institutions around the world have fallen to the divestment movement initiated by the activist group 350.org, publicly committing to fossil fuel divestment representing $39 trillion of assets under management.
“Over the same ten years, global demand for oil and gas has gone up, global emissions have gone up, hydrocarbons still make up 80 per cent of the global energy mix, wind and solar and other renewable energy sources are still not ready for prime time and there has been chronic underinvestment in the Canadian hydrocarbon sector,” says InvestNow executive director Gina Pappano, former TSX head of market intelligence.
In Canada, about 50 institutions (faith-based organizations, universities, pension plans, charities, NGOs) have committed to divestment so far. The most recent Canadian divestment announcements have come from the University of Toronto, Simon Fraser University, University of Waterloo, and the public pension fund Caisse de dépôt et placement du Québec.
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