My 2020 New Year鈥檚 resolution was to get rich. So far听that has mainly consisted of selling off used outdoor gear. (Anyone want a vintage Wave Sport EZ kayak? I鈥檒l give ya a great deal.) But part of my bigger-picture goal is to invest听and not just spend my money on skis.
In the morass of trying to understand markets, a big question emerged: Could I invest in funds that align with my values鈥攏amely, not contributing to the destruction听of the planet听on the back of my own selfish greed? And it turns out that I鈥檓 not the only one trying to decipher sustainable investing. Big-money managers are doing the same.
BlackRock, the world鈥檚 largest asset manager, made waves in January when it announced that, going forward, all the firm鈥檚 investing choices would be backed by sustainability. It鈥檇 invest in environmental, social, and governance (ESG) funds, start to divest from coal, and let clients screen investments for carbon-free choices. 鈥淐limate risk is investment risk,鈥 CEO Larry Fink said in a听.听
BlackRock鈥檚 combined funds of $7.4 trillion are larger than the economy of Japan. If the company were听a country, it would be the world鈥檚 third-largest economy, and Fink鈥檚 declaration is by far the biggest push in a groundswell of sustainable investing. As climate change threatens the status quo of everything from real estate to grocery shopping, it鈥檚 becoming increasingly clear that not destroying the environment makes long-term financial sense.
罢丑别听听has also said that it will no longer fund oil, gas, and coal projects after 2021. And the听, which manages almost $4 billion, has created a new index fund of companies that are curbing carbon emissions in accord听with the Paris Agreement, investing nearly $800 million. Corporations are falling in line, too. Microsoft听 it would become 100 percent carbon negative by 2030 and invest $1 billion in a climate-innovation fund. Taken together, the declarations are an important signal about the financial importance of green investing. They wouldn鈥檛 be doing it if it didn鈥檛 pencil out.
Fink says the move to sustainability at BlackRock came internally, from workers and consumers who were worried about ethics, as well as from the market, where climate change is making traditional energy investments less valuable. The pivot is for BlackRock鈥檚 bottom line as much as it is for the firm鈥檚听beliefs. It鈥檚听trying to be on the right side of history while making money. That runs counter to an old, now false narrative suggesting that green investing doesn鈥檛 pay. In fact, the opposite is proving to be true.
A report from the financial-services firm 听found that corporations are now facing financial risk from climate change, and that there were nearly 40 climate events鈥攊ncluding floods and fires鈥攖hat caused billion-dollar losses in 2018 alone. Meanwhile, the Institute for Energy Economics and Financial Analysis, a Cleveland-based think tank, found that BlackRock itself over the last decade from its investments in fossil-fuel companies like Chevron, ExxonMobil, and Shell. The shift isn鈥檛 a silver bullet, and听 come at both BlackRock and the Church of England for not going far enough鈥攖he latter听still has holdings in Europe鈥檚 largest oil company, Royal Dutch Shell, for instance, and the number of environmentally responsible funds at BlackRock is still far outweighed by traditional ones. 鈥淒espite recent rapid advances in technology, the science does not yet exist to replace many of today鈥檚 essential uses of hydrocarbons,鈥 Fink hedged in his letter.听
BlackRock鈥檚 recent decision听wasn鈥檛 enough for protestors from Extinction Rebellion and Youth for Climate France, who on February 10, scrawling graffiti and spraying a red anarchist symbol on the floor. But change comes from a lot of places: policy, practice, and public interest. And money often moves the needle faster than anything else. 鈥淎wareness is rapidly changing,鈥 Fink said, 鈥渁nd I believe we are on the edge of a fundamental reshaping of finance.鈥澨
Investing is calculating future risk. And in the face of global climate disruption, investments in sustainable funds in the U.S. , thanks to both a desire from consumers to support institutions that align with their values (hey, that鈥檚 us!) and the returns investors are seeing on those funds. So what we鈥檙e seeing here is a pivot away from shortsighted views of sustainability听and an acknowledgement that it鈥檚 not听 the things we depend on if we want to be wealthy in the long term.听听
Realistically, I鈥檓 probably not going to get rich this year. But it鈥檚 comforting to know that I can put my money where my mouth is, and that my financial investments can mirror my emotional ones. The environmental ethic that pulls me to be in the mountains can also guide my bank account.