Can cutting investment force firms to go green?

Giant fund managers have a vital role to play in the shift to net-zero carbon, but they may not be equipped to make the rapid changes now required, says Ben Chapman

BlackRock is selling off investments in coal power generation (Getty)

The decision by BlackRock, a giant fund manager with $7 trillion under its control, to start using its considerable clout to tackle climate change should be welcomed. But its newfound commitment to the environment has some major limitations.

First, the commitment applies only to the $1.8 trillion of funds BlackRock “actively” manages, buying and selling investments in order to generate the best returns.

That leaves $5 trillion of funds that are “passively” managed, which will stay where they are for now. These typically just track an index like the S&P 500 or the FTSE 100, both of which count fossil fuel firms among their biggest constituents.