The world’s largest fund manager will dramatically cut its exposure to thermal coal as it pledged to toughen its stance on climate change

A changing climate means dramatic risks for the world – and for investments too, BlackRock chief Laurence Fink said in his influential annual letter to CEOs.

To prepare for and protect against those climate risks, Mr Fink said his firm will make a series of moves putting climate change and sustainability at the centre of its investing approach.

Among them, BlackRock will cut out investments in some coal producers from some of its portfolios, sharply increase the number of sustainability-focused funds that it offers, and vote against companies at shareholder meetings when they’re too slow in disclosing and mitigating their impact on the environment.

“Climate change has become a defining factor in companies’ long-term prospects,” Mr Fink wrote in his letter, adding that he believes “we are on the edge of a fundamental reshaping of finance” because of it.

He predicted that the changes in how capital is deployed will come “more quickly than we see changes to the climate itself,” and “sooner than most anticipate.”

For all the noise made by Mr Fink’s announcement, the reaction in the stock market was muted on Tuesday.

Energy stocks in the S&P 500 were down, but not as much as some other corners of the market. Coal stocks were mixed.

In his letter, Mr Fink said companies and investors have a role to play in the transition to a low-carbon world, but governments will ultimately need to lead the way.

He said BlackRock would require companies to improve their financial disclosure to shareholders in relation to climate risks and sustainability.

“In the absence of robust disclosures, investors, including BlackRock, will increasingly conclude that companies are not adequately managing risk,” he wrote.

In a separate letter to its clients, BlackRock said it would increase the number of “sustainable” versions of its products, including passively managed exchange traded funds.

-with AAP