..



.

Business News

BlackRock is the canary in the coalmine. Its decision to dump coal signals what's next

  • Written by John Quiggin, Professor, School of Economics, The University of Queensland

The announcement by BlackRock, the world’s largest fund manager, that it will dump[1] more than half a billion dollars in thermal coal shares from all of its actively managed portfolios, might not seem like big news.

Announcements of this kind have come out steadily over the past couple of years.

Virtually all the major Australian and European banks and insurers, and many other global institutions, have already announced such policies.

According to the Unfriend Coal Campaign[2], insurance companies have stopped covering roughly US$8.9 trillion of coal investments – more than one-third (37%) of the coal industry’s global assets, and stopped offering reinsurance to 46% of them.

Blackrock matters because it is big

The announcement matters, in part because of Blackrock’s sheer size.

It is the world’s largest investor, with a total of $US7 trillion in funds under its control. Its announcement it will “put climate change at the center of its investment strategy[3]” raises questions about the soundness of smaller financial institutions that remain committed to coal and to a carbon-based economy.

image Exract from BlackRock's letter to clients, January 14, 2020[4] Blackrock is also important because its primary business is index funds, that are meant to replicate entire markets. So far these funds are not affected by the divestment policy. BlackRock’s iShares United States S&P 500 Index fund[5], for instance, has nearly US$23 billion in assets, including as much as US$1 billion in energy investments. But the contradiction between the company’s new activist stance and the passive replication of an energy-heavy index such as Australia’s is obvious. The pressure to find a solution will grow. In time, the entire share market will be affected One solution might be for large mining companies such as BHP to dump their coal assets in order to remain part of both Blackrock’s actively managed (stock picking) and passively managed (all stocks) portfolios. Another might be the development of index funds from which firms reliant on fossil fuels are excluded. It is even possible that the compilers of stock market indexes will themselves exclude these firms. The announcement has big implications for the Australian government. Read more: Fossil fuel campaigners win support from unexpected places[6] Blackrock chief executive Laurence Fink noted that climate change has become the top issue raised by clients[7]. He said it would soon affect all all investments – everything from municipal bonds to mortgages for homes. Once investors start assessing government bonds in terms of climate change, Australia’s government will be in serious trouble. Australia’s AAA rating will be at risk The bushfire catastrophe and the government’s inadequate response have shown the world Australia is both among the countries most exposed to climate catastrophe and one of the worst in terms of contributions to solutions. Once bond investors follow the lead of Blackrock and other financial institutions, divestment of Australian government bonds will follow. This process has already started, with the decision of Sweden’s central bank[8] to unload its holdings of Australian government bonds. Taken in isolation, Sweden’s move had virtually no effect on Australia’s bond prices and yields. But the most striking feature of the divestment movement so far is the speed with which it has grown from symbolic gestures to a severe constraint on funding for the firms it touches. Read more: Climate change: why Sweden's central bank dumped Australian bonds[9] The fact that the Adani corporation was unable to find a single bank willing to fund its Carmichael mine[10] is an indication of the pressure that will come to bear. The effects might be felt before large-scale divestment takes place. Ratings agencies such as Moody’s[11] and Standard and Poors[12] are supposed to anticipate risks to bondholders before they materialise. It’ll make inaction expensive Once there is a serious threat of large-scale divestment in Australian bonds, the agencies will be obliged to take this into account in setting Ausralia’s credit rating. The much-prized AAA rating is likely to be an early casualty. That would mean higher interest rates for Australian government bonds which would flow through the entire economy, including the home mortgage rates mentioned in the Blackrock statement. The government’s case for doing nothing about climate change (other than cashing in on past efforts) has been premised on the “economy-wrecking[13]” costs of serious action. But as investments associated with coal are increasingly seen as toxic, we run an increasing risk that inaction will cause greater damage.

Authors: John Quiggin, Professor, School of Economics, The University of Queensland

Read more http://theconversation.com/blackrock-is-the-canary-in-the-coalmine-its-decision-to-dump-coal-signals-whats-next-129972

Digital Agency

Business Daily Media Business Development

Exciting Things About Sydney

Sydney is one of Australia’s largest cities that boasts a population of over 4 million people. It is a city that is famous for its picturesque views, multicultural people, superb weather, ...

News Company - avatar News Company

Accor announces new partnership with Grab to help members Live Limitless

Accor has announced a new strategic partnership between its new lifestyle loyalty programme, ALL - Accor Live Limitless and South East Asia’s leading super app, Grab. The deal brings toget...

Accor Pacific - avatar Accor Pacific

Upgrading to Deep Pocket Sheets

So, you have this amazingly comfortable bed that has a built-in topper and you are struggling to find the right bedding. You need to look for a sheet called deep pocket sheets or mega fi...

News Company - avatar News Company

Food you need to try in Beijing

Beijing is a beautiful and interesting destination for any kind of traveler. However, foodies will find a new heaven and will be able to try out tasty, flavorful and sometimes very special...

News Company - avatar News Company

4 Best Budget-Friendly Attractions in Las Vegas

Perhaps no other city in the world deserves the moniker “Sin City” more than Las Vegas. This city has been illustrated in countless works of art as the place where dreams are made, lives a...

News Company - avatar News Company

Bahrain Property Show 2018: How does it reflect the real estate market development in Bahrain

It is no secret that the Arabian Peninsula and the Gulf Cooperation Council (GCC) countries are currently going through a lot of pivotal changes. Such changes do not include economic or po...

News Company - avatar News Company

Business Daily Media Business Reports

Di Jones real estate recognises high achievers

Di Jones celebrated its outstanding performers on Saturday (24 February 2018) evening at the Di Jones Real Estate Annual Awards.                               The bla...

Helen Hull - avatar Helen Hull

Eclipse Travel Expands Operations to New Zealand

Eclipse Travel, specialists in key adventure destinations such as Antarctica, the Arctic, Africa and Latin America, have announced today their expansion of operations to ...

Yvonne Kong - avatar Yvonne Kong

How medical professionals can benefit from an overall wealth management solution

As a health care professional, you have made it your life's work to focus on the care and health of the general public. While this kind of work can be extremely rewarding...

News Feature Team - avatar News Feature Team

Why Pinterest Should Be Part of Your Marketing Strategy

Pinterest is a growing social media platform that can deliver significant traffic to your website and new followers to your brand. With it’s steady growth and outrageous ...

Greg Nunan - avatar Greg Nunan

The top reasons why gyms fail

Steve Grant is a Business Coach and Founder of GymHub.com.au   Every month thousands of new trainers walk out of their 6-month course with the qualifications needed ...

Steve Grant - avatar Steve Grant

WHITE LABEL NOBA’s Winter 2016 season: Earth + Country

Taking cues from the warm winter colours of tobacco and caramel, and combining them with the strength of navy and the embracing lightness of whites and creams; and then...

Kath Rose - avatar Kath Rose

Former Etihad boss brings substantial event insight to PMY Group Board

Paul Sergeant PMY Group, the architects of the digital insurgency occurring at major venues across Australia and New Zealand, are delighted to welcome 35 year even...

Annie Konieczny - avatar Annie Konieczny

More training for coffee making than property sales: REINSW

Sydney 9 May 2016. An overhaul of education and training standards for the real estate profession must take place to help prevent illegal activities, according to the Rea...

Helen Hull - avatar Helen Hull