BlackRock's mighty carbon footprint

Feb 01, 2022 View in browser   By Avery Ellfeldt and Catherine Boudreau THE BIG IDEA The world's biggest asset manager is self-disclosing its role in global warming. | (Mark Lennihan/AP Photo) BLACKROCK TAKES A STAB — Wall Street titan BlackRock, Inc. in 2020 helped send more than 330 million tons of greenhouse gases into the atmosphere, an output equivalent to 71 million tailpipes. Those figures weren't ginned up by environmentalists; they were revealed by the world's largest asset manager when it published the planet-warming emissions associated with nearly two-thirds of its $10 trillion investment portfolio. The disclosure, published in December, was a first for Wall Street. Banks, investment firms and other financial institutions are under pressure to slash their carbon footprints. They say the first step is quantifying the emissions of their borrowers, which requires measuring the carbon output generated by investments in thousands of companies across the economy. BlackRock committed to the herculean task less than a year ago. Its analysis provides preliminary estimates of the absolute emissions associated with more than 65 percent of its portfolio. The exercise proves that it can be done, said Ivan Frishberg, chief sustainability officer at Amalgamated Bank and regional chair of the Partnership for Carbon Accounting Financials, a global standard-setting coalition. BlackRock used PCAF methodology to conduct its analysis. Bank of America Corp., Citigroup Inc., Morgan Stanley and others have committed to do the same. Citigroup is the only other major U.S. institution to release results, but it limited them to power and energy clients. The report by BlackRock was well-received by activists, but it's still a fuzzy snapshot. The firm said it excluded a third of its investment portfolio because of poor data quality and a lack of established methodology. The results also might have been skewed by the coronavirus pandemic, which drove down global emissions. "If this is the minimum baseline, the real number is actually quite a bit higher," said Ben Cushing, who runs the Sierra Club's finance campaign. The data challenge "hopefully sends a really clear signal to financial regulators that they need to act on this issue immediately." The Securities and Exchange Commission is working on a rule that would require companies to be more transparent about their climate risks, decarbonization goals and progress. It's too soon to say what the SEC rule will look like, but advocates want the agency to force companies to disclose the carbon output associated with investment portfolios, known as Scope 3 emissions. "Until the whole corporate ecosystem, issuers and financers, have to start disclosing Scope 3 in a consistent way, voluntary-driven disclosure will always be at some level hamstrung by data," Frishberg said. Avery has all the details here. DATA DIVE Transitioning to net-zero greenhouse gas emissions would cost the U.S. about $35 billion a year in the coming decades, or one-tenth of 1 percent of GDP. But the economic gains from new and expanded clean sectors could total $3 trillion by 2070. And leaving climate change unchecked would stick the U.S. with a $14.5 trillion bill over the same time period. The math is from economists at auditing giant Deloitte, which released a study in January. The brains at the McKinsey Global Institute took a world view and reached similar conclusions. Keeping global warming below 1.5 degrees Celsius would require about $3.5 trillion in additional annual capital spending — equivalent to half of all corporate profits in 2020. That output should be front-loaded this decade with a focus on deploying clean energy and better land management. Many such investments will come with favorable returns and "should not be seen as merely costs," McKinsey wrote in a report published last week. Both studies predicted uneven and low job creation. The transition to a low-carbon economy would create nearly 1 million jobs in the U.S. by 2070, Deloitte found, compared with a scenario where climate change goes unchecked. Advanced manufacturing, renewable energy and private sector services, such as finance, would see many of the job gains. McKinsey foresees a net gain of about 15 million jobs globally. The fossil fuel and auto sectors will need fewer workers as economies shift to renewable power and electric vehicles. There might be less demand for cattle if more people cut back on meat. Poultry farming — a lower-emissions alternative to cattle — would add jobs, as would renewable energy, construction and manufacturing, McKinsey predicted. YOU TELL US Catherine has a gas stove and is a little alarmed. Read on to learn why. Lorraine has one, too, and you can pry it from her cold, dead hands when the time comes. Email lwoellert@politico.com and cboudreau@politico.com. Find us on Twitter @ceboudreau and @Woellert. FOMO? Sign up for the Long Game. Thanks this week to Jordan Wolman, Louise Guillot, Aitor Hernández-Morales, and Arnau Busquets Guàrdia. RESEARCH Researcher Eric Lebel samples natural gas from a stove in Stanford, Calif. | (Rob Jackson via AP) GAS LEAKS — Owning a gas stove is riskier for our health — and the climate — even if you're not using it, according to research from Stanford University. The methane leaking from stoves in the U.S. is equivalent to emissions from about 500,000 gas-powered cars and is exposing people to pollutants that cause respiratory disease. There are a few studies that have measured methane leaks from gas stoves when people are using them. But Stanford scientists went a step further and included emissions when appliances were turned off. The vast majority of emissions occurred while stoves were off, suggesting that gas fittings, connections and in-home gas lines are responsible for most pollution, researchers said. The age or brand of a stove didn't matter. The appliances also directly expose people to formaldehyde, carbon monoxide and nitric oxides that can trigger asthma attacks, coughing, wheezing and difficulty breathing that can land people in the hospital. Gas-powered stoves are becoming the focus of a climate battle. Climate advocates across the country are pushing homeowners to go electric and lobbying municipalities to ban natural gas hookups in new construction. They've already notched wins in several dozen California cities, as well as Seattle and New York City. Utilities and the natural gas industry have defended their business by getting laws passed in 20 states to bar cities from banning hookups. AROUND THE WORLD POWER OF THE PURSE — Governments in Europe are shelling out billions of euros to help people deal with skyrocketing power bills , spelling trouble for national budgets. Electricity prices in Greece, Croatia and Bulgaria, countries among the hardest-hit, were about five times higher in January than a year ago. The price surge, driven largely by a jump in natural gas prices, has Spain calling for power market reform and Poland suggesting a revamp of the bloc's emissions trading system. Those are long-term ideas. In the near term, governments are handing out lots of cash. The budgetary impact in 11 countries examined by POLITICO ranges from at least €210 million in Ireland to €20 billion in France. The measures have kept consumers' discontent at bay, for now. Initially, officials assumed that power prices would drop by spring. Now experts warn that is unlikely. CORPORATE PROMISES GREEN TENTACLES — Green finance is a booming business, and the massive companies that audit the books, rate the bonds, advise on proxy voting and categorize the world's companies are spending billions to boost their climate-related operations. In many cases, firms that rate or evaluate companies on criteria such as climate risk also sell services to help companies address these issues. U.S. financial services firms have spent more than $3.5 billion buying green-ratings companies and data providers, a review by The Wall Street Journal found. The Big Four audit firms also are moving into the environmental, social and governance arena. Don't forget: Conflicts of interest in the credit-ratings industry were one cause of the financial crisis. WHAT WE'RE CLICKING — It's about time. Los Angeles, "a metropolis forged by water heists from distant lands," is trying to build a future where water won't run out. Bloomberg has the story. — From sea snot to jet fuel. A laboratory in Istanbul funded by the European Union and Turkey is developing biofuels from algae, Climate Change News reports . Sea snot — or marine mucilage — has blanketed the Sea of Marmara off Turkey's coast, where it is killing shellfish and hurting the fishing industry.   Follow us on Twitter Catherine Boudreau @ceboudreau Lorraine Woellert @Woellert   Follow us

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