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By Jo Harper
The Democratic Party candidate Joe Biden proposes net-zero CO2 emissions in the United States by 2050. It's an ambitious target, but 30 years is a long time in politics and there is a key tension between the party's moderate nominee with links to corporate funders, such as the asset manager BlackRock, and progressives whose votes he needs to win. This is nowhere better seen perhaps than on environmental issues, where campaigns to green corporate America have tended to fizzle out.
Examples of good intentions abound. Nonprofit organization Carbon Disclosure Project (CDP) this week, for example, launched a campaign with a $20 trillion-strong group of investors to encourage companies to commit to stronger action on climate change. In the campaign, 137 institutions asked 1,800 companies to set science-based targets for reducing CO2 emissions. The group of 1,800 represent 25% of total global emissions and represent 40% of the MSCI ACWI Index, which is MSCI's global equity index.
"The importance of investor engagement to drive sustainable corporate action cannot be overstated," Emily Kreps, global director of Capital Markets at CDP, said in a press release.
But words and actions have often been out of sync in environmental policy in the U.S. This is well illustrated by the ambitious-sounding plans of the world's largest asset manager, BlackRock.
BlackRock CEO Larry Fink said earlier this year that by the end of 2020 the financial corporation would stop its actively managed funds from investing in companies that get 25% or more of their revenue from coal operations. Furthermore, it would enhance transparency over how it votes in shareholder meetings of firms in its portfolio, create investment products that screen for fossil fuels, and ask companies how they plan to navigate the climate crisis.
BlackRock is close to Biden and some, though not that many, believe a partnership of the two could herald real change in the U.S.'s environmental strategy.
But, says Friends of the Earth, BlackRock conspicuously failed to include a promise to stop investing in companies that cause deforestation, while others worry that a voluntary solution by a passive investment vehicle is not the best way forward.
Friends of the Earth criticized BlackRock this week and other asset management firms in a report for not doing enough to curb global deforestation, which has increased by 40% since 2014 and is a major contributor to climate change. Supply chains for commodities like beef and soy are a key driver of those fires, the group said. Its report accused the "Big Three" asset managers, BlackRock, Vanguard and State Street, of enabling companies in their investment portfolios to avoid promises they made to prevent their supply chains from contributing to destruction of rainforests.
AmazonWatch, part of a coalition of green groups and campaigners called "BlackRock's Big Problem," wrote in a 2019 report that BlackRock was one of the biggest investors in the agribusiness firms responsible for deforestation in the Amazon, with over $2.5 billion worth of shares of such companies. The report found that BlackRock and Vanguard — the largest shareholders in 18 of the 28 carbon-intensive energy and utility companies analyzed — voted 99% of the time for the directors those companies proposed in 2019. And their votes helped kill 16 climate-related shareholder resolutions that year.
At the Heart of Things
"This [CDP campaign] doesn't appear to directly impact BlackRock as it's voluntary," Moira Birss, climate & finance director at Amazon Watch, told DW. "But BlackRock should certainly be asking for 1.5-degree transition plans of all the high emitting companies it invests in."
Birss also says that BlackRock is "again absent from this leading initiative" despite claims by its CEO that no company had done more for climate in 2020.
"Fink claims that BlackRock had 950 'engagements' with companies on climate this year but doesn't provide any transparency on what that means. That's not climate leadership. I would think that if BlackRock leadership could show the impact it is having on climate through these 'engagements,' it would. Instead Fink is making claims about climate action that he can't, or won't, back up," she adds.
Passive Funds Active
BlackRock reported healthy third-quarter profits, the recovery in global financial markets helping it end the quarter with a record $7.81 trillion in assets under management. The New York-based company's net income rose 27% to $1.42 billion, while its shares are up 22% this year.
Supported by an index-fund collection called iShares, it is the world's largest asset manager, with $7.81 trillion of other people's money under its control, a third of it in Europe. This is roughly equal to the world's top 20 pension funds combined. The fund employs 13,900 people spread across 30 countries.
BlackRock's Aladdin risk-management system — a software tool that can track and analyze trading — is used by the U.S. Federal Reserve and European Central Bank (ECB). Today, $21.6 trillion sits on the platform from just a third of its 240 clients, according to public documents verified with the companies and first-hand accounts. That figure alone is equivalent to 10% of global stocks and bonds.
But BlackRock has expanded its power well beyond asset management, including also auditing of banks for regulatory authorities and advising governments on privatization.
"BlackRock is in effect a branch of government, a public utility," Harald Schumann, founder of Investigate-Europe in Berlin, told DW. "It could exert great influence for good but given that two-thirds of its business is index-linked, they have no real power to push for greening of the companies they are invested in," he says.
"Fink personally may well be committed, and it is after all more powerful than many states, a unique phenomenon. But it has an inherent conflict of interest, as an advisor, auditor and investor. The Chinese Wall exists, but how well it actually works is another issue," says Schumann, referring to the strict separation of the firm's services required under financial laws.
Massive Political Influence
Created in 1988, BlackRock has close ties to the Biden campaign, although the company's investments to influence Washington, mean that Fink has also advised the Trump administration on infrastructure privatization and the COVID-19 pandemic. Fink is reportedly hoping for a position in a Biden administration.
BlackRock has avoided being designated a Systemically Important Financial Institution (or SIFI) by the U.S. Treasury's Financial Stability and Oversight Council (FSOC), set up by Dodd-Frank financial regulations, which would require it to be regulated by the American central bank.
The company has spent the last decade lobbying lawmakers, US Treasury officials, and FSOC members with donations. In its Transparency Project report, BlackRock says that it has hired at least 84 former government officials, regulators, and central bankers worldwide since 2004. The world's largest asset manager has also been tapped by the Federal Reserve to oversee three government debt-buying programs designed to fend off economic catastrophe.
This article has been updated to reflect a correction in Deutsche Welle's original story.
Reposted with permission from Deutsche Welle.
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The speed and scale of the response to COVID-19 by governments, businesses and individuals seems to provide hope that we can react to the climate change crisis in a similarly decisive manner - but history tells us that humans do not react to slow-moving and distant threats.
A Game of Jenga
<p>Think of it as a game of Jenga and the planet's climate system as the tower. For generations, we have been slowly removing blocks. But at some point, we will remove a pivotal block, such as the collapse of one of the major global ocean circulation systems, for example the Atlantic Meridional Overturning Circulation (AMOC), that will cause all or part of the global climate system to fall into a planetary emergency.</p><p>But worse still, it could cause runaway damage: Where the tipping points form a domino-like cascade, where breaching one triggers breaches of others, creating an unstoppable shift to a radically and swiftly changing climate.</p><p>One of the most concerning tipping points is mass methane release. Methane can be found in deep freeze storage within permafrost and at the bottom of the deepest oceans in the form of methane hydrates. But rising sea and air temperatures are beginning to thaw these stores of methane.</p><p>This would release a powerful greenhouse gas into the atmosphere, 30-times more potent than carbon dioxide as a global warming agent. This would drastically increase temperatures and rush us towards the breach of other tipping points.</p><p>This could include the acceleration of ice thaw on all three of the globe's large, land-based ice sheets – Greenland, West Antarctica and the Wilkes Basin in East Antarctica. The potential collapse of the West Antarctic ice sheet is seen as a key tipping point, as its loss could eventually <a href="https://science.sciencemag.org/content/324/5929/901" target="_blank">raise global sea levels by 3.3 meters</a> with important regional variations.</p><p>More than that, we would be on the irreversible path to full land-ice melt, causing sea levels to rise by up to 30 meters, roughly at the rate of two meters per century, or maybe faster. Just look at the raised beaches around the world, at the last high stand of global sea level, at the end of the Pleistocene period around 120,0000 years ago, to see the evidence of such a warm world, which was just 2°C warmer than the present day.</p>Cutting Off Circulation
<p>As well as devastating low-lying and coastal areas around the world, melting polar ice could set off another tipping point: a disablement to the AMOC.</p><p>This circulation system drives a northward flow of warm, salty water on the upper layers of the ocean from the tropics to the northeast Atlantic region, and a southward flow of cold water deep in the ocean.</p><p>The ocean conveyor belt has a major effect on the climate, seasonal cycles and temperature in western and northern Europe. It means the region is warmer than other areas of similar latitude.</p><p>But melting ice from the Greenland ice sheet could threaten the AMOC system. It would dilute the salty sea water in the north Atlantic, making the water lighter and less able or unable to sink. This would slow the engine that drives this ocean circulation.</p><p><a href="https://www.carbonbrief.org/atlantic-conveyor-belt-has-slowed-15-per-cent-since-mid-twentieth-century" target="_blank">Recent research</a> suggests the AMOC has already weakened by around 15% since the middle of the 20th century. If this continues, it could have a major impact on the climate of the northern hemisphere, but particularly Europe. It may even lead to the <a href="https://ore.exeter.ac.uk/repository/handle/10871/39731?show=full" target="_blank" rel="noopener noreferrer">cessation of arable farming</a> in the UK, for instance.</p><p>It may also reduce rainfall over the Amazon basin, impact the monsoon systems in Asia and, by bringing warm waters into the Southern Ocean, further destabilize ice in Antarctica and accelerate global sea level rise.</p>The Atlantic Meridional Overturning Circulation has a major effect on the climate. Praetorius (2018)
Is it Time to Declare a Climate Emergency?
<p>At what stage, and at what rise in global temperatures, will these tipping points be reached? No one is entirely sure. It may take centuries, millennia or it could be imminent.</p><p>But as COVID-19 taught us, we need to prepare for the expected. We were aware of the risk of a pandemic. We also knew that we were not sufficiently prepared. But we didn't act in a meaningful manner. Thankfully, we have been able to fast-track the production of vaccines to combat COVID-19. But there is no vaccine for climate change once we have passed these tipping points.</p><p><a href="https://www.weforum.org/reports/the-global-risks-report-2021" target="_blank">We need to act now on our climate</a>. Act like these tipping points are imminent. And stop thinking of climate change as a slow-moving, long-term threat that enables us to kick the problem down the road and let future generations deal with it. We must take immediate action to reduce global warming and fulfill our commitments to the <a href="https://www.ipcc.ch/sr15/" target="_blank" rel="noopener noreferrer">Paris Agreement</a>, and build resilience with these tipping points in mind.</p><p>We need to plan now to mitigate greenhouse gas emissions, but we also need to plan for the impacts, such as the ability to feed everyone on the planet, develop plans to manage flood risk, as well as manage the social and geopolitical impacts of human migrations that will be a consequence of fight or flight decisions.</p><p>Breaching these tipping points would be cataclysmic and potentially far more devastating than COVID-19. Some may not enjoy hearing these messages, or consider them to be in the realm of science fiction. But if it injects a sense of urgency to make us respond to climate change like we have done to the pandemic, then we must talk more about what has happened before and will happen again.</p><p>Otherwise we will continue playing Jenga with our planet. And ultimately, there will only be one loser – us.</p>Trending
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