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BlackRock and FTSE team up on fossil fuel exclusion indices

New offering omits companies linked to fossil fuel reserves

BlackRock, the world’s largest asset management company with $4.32trn (€3.1trn) in assets under management, has teamed up with index group FTSE on a new fossil-free index series in the latest sign of growing momentum in the fossil fuel divestment debate.

The new offerings will omit companies linked to ownership and/or extraction of carbon based fossil fuel reserves and BlackRock will launch an investment solution that tracks the new indices, officially known as the FTSE Developed ex Fossil Fuels Index Series.

Seed investment will come from the Natural Resources Defense Council (NRDC), the 1.4m-member New York-based environmental advocacy group, who said the initiative is “about creating the kind of world we want to leave for the next generation”. The NRDC, which features film stars Leonardo DiCaprio and Robert Redford on its trustee board, is chaired by construction mogul Daniel Tishman.

FTSE, which is owned by the London Stock Exchange and which recently updated the methodology for its longstanding FTSE4Good series, said the launch would help implement a “total exclusion model” for fossil fuel-linked stocks.Richard Kushel, Head of Strategic Product Management at BlackRock, said the development allowed it to offer clients “innovative investment options that appeal to their mission-driven goals”.

A “total exclusion model” for fossil fuel-linked stocks

Companies classified in the Exploration & Production, Integrated Oil & Gas, Coal Mining and General Mining subsectors, according to the index sector’s Industry Classification Benchmark (ICB), will be excluded if their revenues come from coal mining and petroleum/natural gas exploration and production; or via proved and probable reserves in coal, oil or gas.

UK campaign group ShareAction welcomed the new index products and said it would bring them to the attention of UK pension funds.

“We want to move toward a world that no longer relies on dirty energy that threatens our future, damages our communities and destabilizes our climate,” said Frances Beinecke, President of the Natural Resources Defense Council. A fossil fuel-free future was where the NRDC wanted to direct its financial resources. Link to announcement