<story><title>BlackRock’s decision to dump coal signals what’s next</title><url>https://theconversation.com/blackrock-is-the-canary-in-the-coalmine-its-decision-to-dump-coal-signals-whats-next-129972</url></story><parent_chain><item><author>wtvanhest</author><text>Disclaimer: I worked for BlackRock for about 3 years on an investment team (but its been a while and I don&amp;#x27;t have a dog in this fight)&lt;p&gt;BlackRock is a very simple business to understand.  First, they only investment money on behalf of their clients and they take investment fees for making decisions on behalf of their clients (investing their money).&lt;p&gt;They break the business in to two parts:&lt;p&gt;Alpha: old school mutual funds, new school quant funds, real estate etc. Anything where managers get paid big bucks to make investment decisions on behalf of clients.&lt;p&gt;Beta: passive investment vehicles that blackrock tries to deliver for the lowest price with lowest tracking error (i.e. deliver as close to what the index returns as possible).&lt;p&gt;What BlackRock is doing here, is a VERY, VERY big deal.  They are allowing clients to now pick passive investment strategies which exclude coal or other businesses that people find morally objectionable.  What that means is that if you care about the environment you can move your money to these new passive investments.  As more and more people do it, it will decrease demand for equity in those companies and increase their cost of capital.&lt;p&gt;On the active side, they already had that feature, and many of their clients already ask BlackRock to exclude investments from their active portfolios and were willing to accept less return.  (BlackRock has offered that for a very long time).&lt;p&gt;I find very few things interesting that asset managers do, but I am going to look at all my passive investments and try to get them moved over.  I bet passive funds without coal etc. will outperform while more and more people move money from vanilla S&amp;amp;P500 to S&amp;amp;P500 without coal.&lt;p&gt;Eventually those coal companies may fall out of indexes all together which will really increase their cost of capital.&lt;p&gt;Brilliant move by Fink, and I applaud it.</text></item><item><author>nostromo</author><text>Matt Levine, as always, provides the most honest and direct commentary about this.  Here&amp;#x27;s the start, but the whole piece is interesting, as pointed out by a reply.&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;opinion&amp;#x2F;articles&amp;#x2F;2020-01-14&amp;#x2F;blackrock-has-green-plans&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;opinion&amp;#x2F;articles&amp;#x2F;2020-01-14&amp;#x2F;blackr...&lt;/a&gt;&lt;p&gt;&amp;gt; Will BlackRock’s decision to send a strongly worded letter about environmental sustainability reshape how corporate America does business? Well, I remember two years ago when Larry Fink sent a strongly worded letter about how companies needed to make society better, and that too was supposedly “likely to cause a firestorm in the corner offices of companies everywhere,” and now, uh, same society really.&lt;p&gt;&amp;gt; Now BlackRock will send a strongly worded letter to CEOs about the environment. It will arrive on the desk of the CEO of, I don’t know, giant state-owned oil company Saudi Aramco? A company where, according to Bloomberg data, BlackRock is the largest outside shareholder. A company that did a bond offering last year—after the Saudi government murdered and dismembered Jamal Khashoggi, after Fink sent that letter about making society better—in which BlackRock was also a big investor. “We wanted the Aramco bond to be much bigger,” Fink said, way back in April, when his public-relations goal was to butter up Saudi Arabia. Now it is January, and his public-relations goal is to butter up environmentalists, so BlackRock “will make investment decisions with environmental sustainability as a core goal.” Next time a big oil company is looking for money, presumably that will change again.&lt;p&gt;&amp;gt; I could keep being cynical about this all day.</text></item></parent_chain><comment><author>blago</author><text>Or less environmentally-conscious investors will step in, take advantage, fill the gap, and keep the equilibrium. Obviously, there is a line where decrease demand for equity will not be compensated but we don&amp;#x27;t know where it is and whether we&amp;#x27;ll reach it.</text></comment>
<story><title>BlackRock’s decision to dump coal signals what’s next</title><url>https://theconversation.com/blackrock-is-the-canary-in-the-coalmine-its-decision-to-dump-coal-signals-whats-next-129972</url></story><parent_chain><item><author>wtvanhest</author><text>Disclaimer: I worked for BlackRock for about 3 years on an investment team (but its been a while and I don&amp;#x27;t have a dog in this fight)&lt;p&gt;BlackRock is a very simple business to understand.  First, they only investment money on behalf of their clients and they take investment fees for making decisions on behalf of their clients (investing their money).&lt;p&gt;They break the business in to two parts:&lt;p&gt;Alpha: old school mutual funds, new school quant funds, real estate etc. Anything where managers get paid big bucks to make investment decisions on behalf of clients.&lt;p&gt;Beta: passive investment vehicles that blackrock tries to deliver for the lowest price with lowest tracking error (i.e. deliver as close to what the index returns as possible).&lt;p&gt;What BlackRock is doing here, is a VERY, VERY big deal.  They are allowing clients to now pick passive investment strategies which exclude coal or other businesses that people find morally objectionable.  What that means is that if you care about the environment you can move your money to these new passive investments.  As more and more people do it, it will decrease demand for equity in those companies and increase their cost of capital.&lt;p&gt;On the active side, they already had that feature, and many of their clients already ask BlackRock to exclude investments from their active portfolios and were willing to accept less return.  (BlackRock has offered that for a very long time).&lt;p&gt;I find very few things interesting that asset managers do, but I am going to look at all my passive investments and try to get them moved over.  I bet passive funds without coal etc. will outperform while more and more people move money from vanilla S&amp;amp;P500 to S&amp;amp;P500 without coal.&lt;p&gt;Eventually those coal companies may fall out of indexes all together which will really increase their cost of capital.&lt;p&gt;Brilliant move by Fink, and I applaud it.</text></item><item><author>nostromo</author><text>Matt Levine, as always, provides the most honest and direct commentary about this.  Here&amp;#x27;s the start, but the whole piece is interesting, as pointed out by a reply.&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;opinion&amp;#x2F;articles&amp;#x2F;2020-01-14&amp;#x2F;blackrock-has-green-plans&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;opinion&amp;#x2F;articles&amp;#x2F;2020-01-14&amp;#x2F;blackr...&lt;/a&gt;&lt;p&gt;&amp;gt; Will BlackRock’s decision to send a strongly worded letter about environmental sustainability reshape how corporate America does business? Well, I remember two years ago when Larry Fink sent a strongly worded letter about how companies needed to make society better, and that too was supposedly “likely to cause a firestorm in the corner offices of companies everywhere,” and now, uh, same society really.&lt;p&gt;&amp;gt; Now BlackRock will send a strongly worded letter to CEOs about the environment. It will arrive on the desk of the CEO of, I don’t know, giant state-owned oil company Saudi Aramco? A company where, according to Bloomberg data, BlackRock is the largest outside shareholder. A company that did a bond offering last year—after the Saudi government murdered and dismembered Jamal Khashoggi, after Fink sent that letter about making society better—in which BlackRock was also a big investor. “We wanted the Aramco bond to be much bigger,” Fink said, way back in April, when his public-relations goal was to butter up Saudi Arabia. Now it is January, and his public-relations goal is to butter up environmentalists, so BlackRock “will make investment decisions with environmental sustainability as a core goal.” Next time a big oil company is looking for money, presumably that will change again.&lt;p&gt;&amp;gt; I could keep being cynical about this all day.</text></item></parent_chain><comment><author>atombender</author><text>I&amp;#x27;d love to be able to buy something that was exactly like VTI but scrubbed clean of oil, coal, gas, and other sources of environmental damage.&lt;p&gt;There are some specialized ETFs like KRMA, but I don&amp;#x27;t know anything that has environmental criteria that also follows the total market or some large cap index.</text></comment>