BlackRock and Vanguard tell UK inquiry they will not quit fossil fuel investments

The world’s two biggest asset managers BlackRock and Vanguard are among the financial institutions that have told a UK inquiry they will continue to invest in fossil fuels and do not subscribe to the view that climate change plans require an end to new coal, oil and gas investment.

BlackRock is among the asset managers attempting to take a neutral investment stance after Republican attorneys-general and state governors in the US accused the institutions of staging a “boycott” on the fossil fuel sector. Missouri on Tuesday became the latest state to punish the $8tn asset manager, as Treasurer Scott Fitzpatrick announced that the state’s retirement system had pulled out $500mn from BlackRock funds.

BlackRock and Vanguard’s statements on Tuesday were in response to a request by the UK’s Environmental Audit Committee. The committee wrote in August to members of the Glasgow Financial Alliance for Net Zero, an umbrella climate finance group, asking how they would balance retiring fossil fuel assets with assuring the UK’s energy security, given the “pivotal” role of the finance sector in reaching the UK’s environmental goals.

“BlackRock’s role in the transition is as a fiduciary to our clients — it is not to engineer a specific decarbonisation outcome in the real economy,” BlackRock wrote in its response. It expected to remain a long-term investor in carbon intensive companies because of their crucial role in the economy.

Members of the Glasgow alliance that includes BlackRock and Vanguard have committed to financing net zero emissions by 2050.

Brookfield Asset Management was also among the asset managers to have told the UK committee that it had no exclusion policies for fossil fuels. It said it instead encouraged the companies it invested in to reduce their emissions.

Brookfield vice-chair and head of transition investing Mark Carney is one of the founders of the Glasgow alliance and is due to appear before the inquiry on Monday.

Some US-based members of the Glasgow alliance, such as JPMorgan, recently said they could quit, after a UN accreditation body introduced new rules in June saying all members should phase out financing of unabated fossil fuels, or those which did not capture the emissions. The alliance said last week that financial sector subgroups, including the Net Zero Asset Managers alliance, which counts BlackRock, Vanguard and Brookfield Asset Management as members, were free to decide whether to align with the UN guidelines. This was a departure from the policy of making it a condition of membership.

Ben Caldecott, director of the UK Centre for Greening Finance and Investment research initiative, said: “This begs the question of what the criteria to be a member of Gfanz is. Financial institutions shouldn’t be investing in new fossil fuel infrastructure as this is not compatible with the aims of the Paris agreement [on the climate].”

In response to the Missouri move, BlackRock said: “While the actions of some elected officials have attracted media headlines, they do not reflect the totality of our clients’ investment decisions.” The world’s largest money manager received $84bn in net new US assets in the third quarter, even as Republican states pulled out more than $1bn.

Vanguard did not immediately respond to a request for comment on the UK filing.

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