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What’s next for ESG as BlackRock ups the ante for polluting companies

The might of ESG investment is again being wielded by fund managers as BlackRock has cautioned polluting companies to disclose all their emissions data.

BlackRock, the world’s biggest asset manager, wants companies to release what’s known as ‘scope 3’ emissions data – which, specifically, refers to the emissions generated products or services not only its operational footprint.

It would mean, for example, that a fuel company would need to report the emissions created by the end-user as it is consumed, in addition to the emissions generated in the extraction, processing and the transportation of the fuel to market.

This is the latest from BlackRock and chief executive Larry Fink who has in recent months been vocal about ESG (Environmental, social, and governance) issues and specifically climate change.

READ: What does BP and Shell strategy mean for investors?

The investment group cautioned that it could act where there are insufficient disclosures or there is no “credible plan”, by potentially voting against directors they deem as responsible for climate risk oversight.

“We may also support shareholder proposals that we believe address gaps in a company’s approach to climate risk and the energy transition,” BlackRock added.

It comes after major oil companies such as BP PLC and Shell have launched diversification strategies that seek to cap hydrocarbons business and invest in alternative low (or lower) carbon activities – including renewable power and expansion of electric vehicle charging networks.

Both BP and Shell have set ‘net zero’ emissions goals, rather than set absolute gross decarbonisation targets.

Reacting to Shell’s commentary last week, claiming that its oil production had peaked in 2019 and its diversified investment plan, analysts at Citigroup noted that it offered “no real change to the near-term financial metrics”.

It also questioned the timelines and potential effectiveness of Shell’s strategy.

“Core to the plan is to reduce carbon emissions, ‘in step with society’s progress towards achieving net zero’,” Citi analyst Alastair Syme said in a note.

“The bit about ‘in step’ is a relevant one as it makes the point that the company will not seek to move faster than price policy-makers and consumers are prepared to pay.”

Environmental activists also had something to say regarding Shell’s approach.

Mel Evans, head of Greenpeace UK’s oil campaign, said: “Shell’s grotesque ‘customer first’ strategy seeks to blame customers first for climate change.

“Meanwhile Shell, the powerful oil major, brazenly says it will dodge oil production cuts and will simply let output dwindle. Without commitments to reduce absolute emissions by making actual oil production cuts, this new strategy can’t succeed nor can it be taken seriously.”

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