Larry Fink, founder and chief executive of BlackRock–the world’s largest asset manager with nearly $7 trillion in investments–announced today that it would shift its investment policy to make environmental sustainability a core goal moving forward. The announcement came in Fink’s annual letter which is followed closely by business leaders around the world and is seen as a bellwether for large money managers.

“We are on the edge of a fundamental reshaping of finance” he wrote, noting that climate change is forcing investors to “reassess core assumptions.” Fink goes on to site numerous factors that informed his thinking. “Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? he asked  “What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?”

Fink goes on to site climate questions as invariably the number one issue that BlackRock clients around the world ask about. He informed his clients that the new initiatives involved…

  • Making sustainability integral to portfolio construction and risk management;
  • Exiting investments that present a high sustainability-related risk, such as thermal coal producers;
  • Launching new investment products that screen fossil fuels; and
  • Strengthening our commitment to sustainability and transparency in our investment stewardship activities.

Before anyone rushes to confer full climate superhero status on Mr. Fink however it is important to note the BlackRock has faced significant criticism in the past from both within industry and environmental groups as well. According to the New York Times, just last month a British hedge fund manager, Christopher Hohn, stated that it was “appalling” that BlackRock didn’t require industries to disclose their sustainability efforts.  Hohn called BlackRock’s previous efforts “full of greenwash.”

Read the letter here.