Environmental update

Environmental update

February 10, 2020 | By Andrew Skroback in New York

BlackRock, the world’s largest asset manager with $6.8 trillion in assets under management, declared in January that “climate risk is investment risk” and announced that sustainability will be the company’s “new standard” for investing.

Larry Fink, CEO of BlackRock, made the declaration in two letters on January 14, one to corporate CEOs and the other to Blackrock’s clients.

“We believe that all investors, along with regulators, insurers, and the public, need a clearer picture of how companies are managing sustainability-related questions.”

Many expect the move to increase disclosure of financial risks from climate change and other environmental problems more generally. In the long term, broader disclosures about company climate risks and opportunities can be expected to affect how companies invest capital.

Fink’s letter asks companies in which BlackRock invests to make disclosures aligned with the reporting frameworks of the Sustainability Accounting Standards Board and Task Force on Climate-related Financial Disclosures, or TCFD. “This should include your plan for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than two degrees is fully realized, as expressed by the TCFD guidelines,” Fink wrote.

Earlier in January, BlackRock also signed on to the Climate Action 100+ initiative, a global investor engagement initiative through which more than 370 investors seek to push that world’s largest corporate emitters of greenhouse gases to take action on climate change.

Blackrock suggested that “a significant reallocation of capital” will take place sooner than many anticipate, in part “because capital markets pull future risk forward.”

BlackRock has not supported shareholder climate resolutions in the past, and it remains uncertain whether that policy will change.


The US Environmental Protection Agency and the Army Corps of Engineers proposed a new rule in January that would remove protections for certain waters in the United States.

The new “navigable waters protection rule” redefines what waters are protected by the federal Clean Water Act.

Wetlands that are not adjacent to large bodies of water, some seasonal streams that flow for only part of a year, ephemeral streams that only flow after it rains, and water that flows temporarily through underground passages would no longer be protected.

If sustained, the new rule is expected to remove federal protection for more than half of US wetlands and hundreds of thousands of small waterways. Critics worry about the potential for discharges of fertilizers, pesticides and other chemicals into those waters. The changes are being praised by farmers, developers and others who complain that broad protections imposed during the Obama administration were too burdensome.

The new rule retains federal protections for large bodies of water, larger rivers and streams that flow into them, and wetlands that lie adjacent to them.

The rule also eliminates the need to seek certain permits that were subject to regulatory assessment on a case-by-case basis.

A government advisory board of scientists responsible for evaluating the scientific integrity of EPA regulations concluded in December that the proposed water rule “neglects established science.”

Many of the board’s members were appointed by the Trump administration.

The scaling back of water protections will land in court. Several state’s attorneys general and a number of environmental groups have said they plan to sue.


The Trump administration proposed in January to exclude some projects, such as those that receive little federal funding, from review under the National Environmental Policy Act, or NEPA, and to impose a two-year deadline for environmental impact statements.

This is first significant revision in decades to the regulations the federal government issued to implement NEPA.

NEPA requires federal agencies to conduct detailed environmental assessments of any major federal action that could significantly affect the environment, such as by increasing air or water pollution or threatening endangered species or their habitat. Federal actions include such things as federal agency approvals of non-federal actions (such as issuing permits), federal agency funding of projects and the development of federal agency regulations.

Compliance with NEPA can be time consuming. For example, major projects with federal implications, such as pipelines, bridges, highways and power projects, usually have to wait for various federal agencies to catalog and assess potential environmental consequences. The review process can take years.

The proposed new rules would narrow the range of projects that require NEPA review.

The new rules would create a new category of federal actions that the Administration describes as having minimum federal funding or involvement. Projects in the new category could move forward without any assessment.

To help projects move faster, the new rules would also set deadlines of one year for federal agencies to complete reviews of smaller projects and two years to complete reviews of larger ones.

Perhaps the most significant change in the new proposal is language that would relieve federal agencies from having to consider the cumulative impacts of all projects as opposed to looking just at the single project being evaluated. Federal agencies have been required to consider the cumulative impacts since 1978.

A number of courts have interpreted the obligation to take into account cumulative impacts to require federal agencies to consider climate change in their NEPA reviews. While the proposed changes would not bar an agency from thinking about whether a proposed project would contribute to or help with climate change, consideration of the effects on climate change would no longer be required.

The new proposal says that federal agencies are only required to consider environmental effects that are “reasonably foreseeable” and have a “close causal relationship” with the proposed government action at issue.

The new rules will be challenged in court. A raft of lawsuits can also be expected challenging permits issued for individual projects on grounds that the agencies issuing them failed to meet their NEPA obligations.

Whether these lawsuits succeed in court may depend on the extent to which the dozen or so past rulings by courts that federal agencies must consider the cumulative impacts of agency actions relied on the old NEPA regulations, which are changing, or on the bedrock of the statute itself, which cannot be changed by agency regulation.

Another issue will be whether the impacts from upstream and downstream greenhouse gas emissions related to projects like pipelines are “reasonably foreseeable” and have a causal connection to the specific project.

Litigation could delay projects where plaintiffs claim that agencies failed to conduct a proper analysis before taking whatever federal action is at issue, such as granting a federal permit or funding a project.

Public comments on the proposed changes are currently due March 10, 2020, subject to possible extension.


Hartford Financial Services Group Inc., an insurance company, announced a new policy of excluding from coverage any companies that generate more than a quarter of their revenues from thermal coal mining or of their energy production from coal.

The Hartford also said in a December 20 news release that it will not underwrite or invest in the construction of new coal-fired power plants and will limit its association with the tar sands oil sector. It will also work to phase out existing underwriting relationships and divest publicly traded investments exceeding the new threshold by 2023.

The move continues a trend that began in Europe, but that is now expanding in the United States. Eighteen global insurers are reported to have restricted or eliminated insurance coverage for and investments in coal. The Hartford is at least the fourth US insurance company to do so.