Some of the world’s biggest financial firms including BlackRock Inc. and Vanguard Group Inc. have told the UK they have no plans to halt the financing of new fossil-fuel supplies, in response to a list of questions sent by British lawmakers tasked with figuring out how the country can meet its own net-zero obligations.
The inquiry is being led by the Environmental Audit Committee of the House of Commons. Britain, which was successfully sued by a group of climate activists earlier this year for putting forward an unclear net-zero plan, has asked firms to explain how they’re incorporating science-based requirements to phase out and ultimately halt the financing of new fossil-fuel supply, according to a statement published on Tuesday.
The Committee expects the finance sector “will play a significant role in helping determine whether the UK Government’s carbon budgets and its net zero target are likely to be met,” it said. Responses, which weren’t summarized by the Committee, were sent by more than 30 of the world’s biggest banks and investment managers.
BlackRock underlined that it is “obligated to always act in our clients’ financial best interests,” in its response. The firm also said its overall approach to the energy transition doesn’t include fossil-fuel exclusion policies, and that it doesn’t support the International Energy Agency’s net-zero scenario, which calls for no investment in new fossil-fuel supplies.
BlackRock’s goal “is not to engineer a specific decarbonization outcome in the real economy,” it said. And, like other firms surveyed, BlackRock said it’s the role of governments to set targets for private-sector actors. The asset manager also said it expects to remain a long-term investor in carbon-intensive sectors “on behalf of our clients.”
Vanguard provided a similar response, saying it “does not dictate strategy and operations in portfolio companies, and therefore does not have an enterprise view of the IEA net zero scenario and its recommendations for ‘no new investment.”’
The UK initiative to gather responses comes less than a month before world leaders are set to gather for the COP27 climate summit in Egypt. This year, talks will be overshadowed by war in Europe, a cost of living crisis and an energy supply crisis. Meanwhile, emissions are continuing to rise at a dangerous pace, with the planet on track to see warming that is roughly twice the critical threshold identified by scientists.
The International Energy Agency’s May 2021 report states that reducing global carbon emissions to achieve net zero by 2050 will require “nothing less than a complete transformation of how we produce, transport and consume energy,” the UK Committee said in the letter sent to financial firms.
“Achieving this will require a managed decline in the use of fossil fuels, leading the IEA to assert that ‘there is no need for investment in new fossil fuel supply’ or projects beyond those already committed to by 2021,” it said.
The chair of the Environmental Audit Committee’s inquiry said last year it seeks to explore how the Glasgow Financial Alliance for Net Zero, whose members include BlackRock and Vanguard, “can be most effective at driving down global emissions.”
The views held by BlackRock and Vanguard were broadly representative of the responses received by the UK Committee from other firms. Royal Bank of Canada noted that “global decarbonization and energy transition plans are in flux as concerns regarding the cost of energy, inflation, and energy security are managed.”
Morgan Stanley said it will “continue to support energy companies in their work to decarbonize the global economy at a pace that balances climate concerns alongside energy security and other factors.”
Barclays Plc said it thinks it “can make the greatest difference by supporting our clients to transition to a low-carbon economy, rather than by simply phasing out support for them. This is particularly true for our clients in highly carbon-intensive sectors.”
And HSBC Holdings Plc said it “recognizes the importance of energy security and a just transition from fossil fuels” and that “attention has to turn to urgent phase-out of existing coal-fired power.” However, “although renewable alternatives are becoming ever cheaper and more efficient, shutting down coal power plants overnight isn’t an option.”
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