BlackRock Calls for Higher Carbon Price to Tackle Climate Change

Fund house says companies should pay more for the pollution they generate

BlackRock has called on governments globally to make businesses pay a higher price for the pollution they generate, in a move aimed at forcing companies to reduce their carbon emissions.

The world’s largest fund house, which manages $4.9tn for investors, said it is struggling to understand the climate change risks it faces when making investment decisions because the price companies have to pay for emitting carbon is inconsistent.

Joanna Cound, head of government affairs and public policy in Europe for BlackRock, said: “Governments have a fundamental role to play [in] giving clarity and predictability around climate-related policies.

“We are thinking in particular of [governments] creating frameworks that result in higher and consistent carbon prices across all the different sectors.  That would increase certainty and allow a much better quantification of carbon risks within portfolios.”

While there are government-mandated carbon pollution systems in place in certain territories, such as in the EU or California, some of these have come in for criticism.

The EU’s 11-year-old emissions trading system requires many companies to buy permits to emit carbon, but the price of these permits slumped so much after the 2008-09 financial crisis and again in 2013 that critics believe the scheme is not severe enough to drive green investment.

Some analysts estimate that in order to reach the Paris agreement’s goal of keeping global warming well below 2C, the carbon price should be above €40 per tonne.  The current permit price is €6 in Europe.

Ms Cound said a clearer carbon pricing system globally would help drive investments towards greener businesses.

She added that just 80 companies are responsible for more than half of the world’s carbon emissions.  “If we could nudge some of those in the right direction, that can make a big difference.”

BlackRock, which last month released a paper warning about the impact of climate change on portfolios, said:  “Higher carbon prices … could minimize the economic costs of reducing emissions, incentivize companies to innovate and help investors quantify climate factors.”

Carbon pricing and climate change has risen up investors’ agenda in the wake of last year’s Paris agreement to tackle global warning.  There are concerns that as governments introduce policies to combat climate change, some businesses could become stranded or suffer big losses.

In August, 130 investors with more than $13tn in combined assets under management called on the G20 — a forum comprised of 20 large economies — to “provide stable, reliable and economically meaningful carbon pricing that helps redirect investment”.

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