BlackRock, the world's biggest asset manager and a familiar sight on the share registers of many of New Zealand's top companies, has taken the world's corporates to task over environmental sustainability.
Larry Fink, BlackRock's chairman and chief executive, in an open letter to chief executives, said climate change had become a defining factor in companies' long-term prospects and that the evidence on climate risk was compelling investors to look again at the core assumptions surrounding modern finance.
Fink said there would be a "profound reassessment of risk and asset values" as more investors recognised that climate risk is investment risk.
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In addition, he said the world was on the verge of a "significant re-allocation of capital".
It's not the first time Fink has taken the corporate sector to task.
In the past he has hit out at short-termism and has called for US companies to repatriate overseas cash.
In his letter this week, Fink outlined what BlackRock - which has US$7 trillion ($10.5t) in assets under management - was doing to integrate sustainability more deeply into what it does, particularly in the environmental, social and governance (ESG) area.
That meant deepening the integration of sustainability across its investment and risk management platform.
It also meant reducing ESG risks in its active strategies by exiting certain sectors, such as coal.
"We are continuously evaluating the risk-return profile posed by specific sectors we invest in as we seek to minimise risk and maximise long-term return for our clients," Fink said.
"Based on our review, we are in the process of removing from our discretionary active investment portfolios the public securities (both debt and equity) of companies that generate more than 25 per cent of their revenues from thermal coal production, which we aim to accomplish by the middle of 2020," Fink said.
BlackRock would be expanding its sustainable offerings by doubling its ESG exchange traded funds (ETFs) offerings to 150 and would be introducing new fossil-fuel screened funds.
In an interview with CNBC, Fink said the US$3.8t municipal-bond market, which finances roads, utility systems and other infrastructure, was vulnerable to the impacts of devastating storms, wildfires or rising seas.
"This is going to change the municipal-bond market," Fink said after the release of his letter.
"Areas that are more impacted by climate change [are] going to have a harder time to finance their debt if they don't focus on the impact of climate change."
International business news wire Bloomberg said Fink, in the stroke of a pen, had become one of the most powerful champions of green investing in global finance.
"But behind his new sustainable-investing push at BlackRock lies an uncomfortable truth: going green won't be easy or quick. Today BlackRock funds hold a 6.7 per cent stake in Exxon Mobil Corp, for instance, as well as 6.9 per cent in Chevron Corp and 6 per cent in coal giant Glencore Plc.
"And, in all likelihood, they'll keep holding them, for the same reason that BlackRock is so big and successful: two thirds of its roughly US$7t in assets are squirreled away in funds that passively track market indexes, rather than actually pick stocks or bonds," Bloomberg said.