BlackRock Inc. is singling out funds with combined assets of $150bn for an extra screen designed to ensure the investments are aligned with strict climate goals.

The world’s largest money manager said the decision affects 83 funds domiciled in Europe, according to an update to clients sent on Tuesday. The strategy, which will be applied to portfolios with stated climate and decarbonization objectives, also may be extended to funds in the US and Asia-Pacific region, as well as separate accounts managed for clients, BlackRock said.

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“An increasing number of clients are seeking to minimize the financial risk and maximize the financial opportunities associated with the transition to a low-carbon economy,” BlackRock said. They’re “interested in sustainable and transition investing, with some including decarbonization as an investment objective in their mandates.”

The new climate policies, which apply to a small fraction of BlackRock’s total $10.5 trillion in assets under management, show how the firm is navigating the backlash against ESG. The money manager has faced intense scrutiny from Republican politicians across the US for its stance on climate change, while environmental advocates and some Democrats have urged BlackRock to use its clout to press companies harder on their emissions.

Despite the fraught political backdrop, BlackRock has emerged as the uncontested leader in environmental, social and governance investing, Morningstar Inc. said in April. And in his annual letter, Chief Executive Officer Larry Fink wrote that the energy transition is “a major economic trend being driven by nations representing 90% of the world’s GDP.” It’s created “a ripple effect in the markets,” with both risks and opportunities for investors, he said.

For funds included in its decarbonization policy unveiled on Tuesday, BlackRock said it will take the broadest measure of greenhouse-gas emissions into account. That includes so-called Scope 3, which reflects the emissions of a company’s value chain. It also will assess how well corporate strategies are aligned with the goal of limiting global warming to 1.5C above pre-industrial temperatures.

Crucially, the portfolios affected by the policy will consider both financial performance and decarbonization objectives, BlackRock said.

However, “for all other funds, BlackRock will continue to undertake our stewardship responsibilities with a sole focus on advancing clients’ long-term financial returns in line with our benchmark policies,” Joud Abdel Majeid, head of investment stewardship at BlackRock, said in a message to clients.

The new policy is due to take effect in the fourth quarter.

Source: BNN

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