BlackRock's ESG shift mounts sustainability pressure on Germany's energy-hungry companies

The strategic shift of US investment management firm BlackRock to align its financial operations with sustainability criteria starts having an impact on Germany's most energy intensive companies, Peter Köhler and Robert Landgraf write in Handelsblatt. "We looked at 400 companies whose business is especially energy intensive," BlackRock Germany head Dirk Schmitz told the newspaper. Schmitz said the asset management firm had sent a reminder about the application of so-called ESG (environmental, social, governance) investment criteria to 244 companies and that it withheld its support for individual board members or for the entire board of 53 companies, including German heavyweights like Daimler, Lufthansa, Siemens or Heidelberg Cement. "And BlackRock is not alone on that," the authors say. "More and more major insurers, pension funds and asset managers use their market power to increase pressure on companies to conduct their business sustainably," they write. Also other asset managers like Union Investment or DWS say tightened ESG standards are poised to increasingly shape investment practices, with Union Investment's Janne Werning arguing that business models such as coal-fired power production or internal combustion engines in cars would prove to no longer be economically viable in the long-run.

The move announced by BlackRock CEO Larry Fink in early 2020 falls in line with a number of initiatives aiming to exploit the great potential of the financial sector for emissions reduction. The EU's new rulebook for green finance and Germany's sustainable finance push for better establishing ESG criteria in the financial operations across the economy are just two examples of how climate risks and other non-financial aspects of investments could reshape the way company financing is carried out.