BlackRock CEO Larry Fink’s 2020 annual letter sounds fantastic. It declares that the world’s largest asset manager will prioritize climate risks in investing. It acknowledges that “Climate change has become a defining factor in companies’ long-term prospects…Climate risk is investment risk.” We agree.

BlackRock is again elevating the importance of climate change and its negative impact on the entire economy. Why now? Because the impacts of climate change are dire and the stakes of inaction are clear. BlackRock’s reputation has been hit hard recently with the spate of street theatre and die-ins at BlackRock’s headquarters and branch offices. Shareholder proposals have been filed this year asking BlackRock to live up to its climate statements and end its practice of voting against major climate proposals. Perhaps it is the distressing loss of large clients, including the City of Seattle and the world’s largest pension fund (Japan’s GPIF), leading the charge in publicly announcing divestment from BlackRock due to its climate inaction. Whatever the reason, this statement is important.

Shareholder advocates on climate change have long been actively seeking support from BlackRock for their climate-related resolutions (such as Paris-compliance, stranded assets, net zero, fugitive methane, bank financing extraction, greenhouse gas reduction, transitions away from coal…). Time and again BlackRock has voted against the requested actions, claiming it is working with companies behind the scenes. Any such “behind the scenes” action has had little effect. Companies like Exxon and Chevron, recipients of a number of climate-related proposals over the years, continue business as usual, consistently refusing to transition meaningfully to a Paris-aligned business model.

Larry Fink’s letter signals that BlackRock is finally willing to put its considerable weight behind shareholder’s climate-related proposals. If BlackRock’s latest letter signals a solid voting block of $40+ trillion in favor of these shareholder actions, then the power of investors has the potential to create a tsunami of change. BlackRock recently joined the Climate Action 100+, indicating the potential that real change is at hand.

If nothing else, Mr. Fink’s call for disclosure using TCFD, SASB, and other sustainability metrics, could be significant. Greater disclosure will certainly help investors to separate leading companies from laggards. As money moves to leading companies on climate action, laggards must soon follow.

While we are optimistic, Mr. Fink’s more substantive statements seem to indicate the potential for insufficient action. Coal has been in the process of being underweighted for years now, having lost 80 percent of its value. Particularly concerning is the letter’s fine print — that this commitment is only in BlackRock’s discretionary active investment portfolios which will sell out of all companies that get more than 25 percent of sales from thermal coal. This means that large, diversified miners — which also rank among the largest coal producers — will not be affected. As important is what is not addressed in the letter: oil & gas, the banks that finance extraction, and coal-fired utilities. These are the companies which require clear attention from major asset managers. These companies must start transitioning toward Paris-compliance, with net-zero planning, or there is little hope to curb the global warming that is underway. We hope that BlackRock uses its power to vote with shareholder advocates on such critical issues.

Another area not discussed in the letter is the current U.S. Securities and Exchange Commission’s (SEC) attack on shareholder democracy. We are hopeful that BlackRock and other large asset managers will speak up for their own rights as shareholders and stand shoulder-to-shoulder with the investor community in defending their right to raise important environmental, social, and governance (ESG) issues with companies and other shareholders. The SEC needs to hear that Mr. Fink believes in shareholder democracy and respects the voices of investors to raise material issues. If we are to take this letter seriously, then Mr. Fink needs to strongly condemn the SEC’s proposed changes and protest his own company’s loss of shareholder power. The comment period expires on Feb. 3 and we have not heard from him yet.

Bottom line: the new BlackRock letter is encouraging, but must be more than words. As with its signing of the Business Roundtable new purpose of a corporation, shareholders hope to see hard-hitting action from BlackRock. For now, we will get back to work and see what happens during this crucial proxy season. We hope that BlackRock will finally put their money and votes where their words are.