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BlackRock shakes up business to focus on sustainable investing

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BlackRock has unveiled sweeping changes in an effort to position itself as a leader in sustainable investing after criticism that the firm has failed to use its clout to combat climate change.

The world’s largest fund manager, with $7tn in assets, will double the number of sustainability focused exchange traded funds it offers to 150. It will also cut companies that derive a quarter or more of their profits from thermal coal from its actively managed portfolios, as it aims to increase its sustainable assets ten-fold from $90bn today to $1tn within a decade. 

The changes were announced in a letter sent to clients on Tuesday and released concurrently with chief executive Larry Fink’s annual letter to chief executives, in which he warned climate change represented a risk to markets unlike any previous crisis.

“Climate change is different. Even if only a fraction of the projected impacts is realised, this is a much more structural, long-term crisis,” Mr Fink said. “Companies, investors, and governments must prepare for a significant reallocation of capital.”

Mr Fink wrote in his letter to clients that BlackRock will now assess environmental, social and governance (ESG) “with the same rigour as traditional measures such as liquidity and credit risk”. The fund manager will also push companies to disclose their climate risk according to standards set by the Sustainability Accounting Standards Board (SASB) and the Taskforce for Climate Related Financial Disclosure (TCFD), and will vote against management at companies that do not make sufficient progress to account for those risks.

“Our investment conviction is that sustainability — and climate-integrated portfolios can provide better risk-adjusted returns to investors,” Mr Fink wrote. “We believe that sustainable investing is the strongest foundation for client portfolios going forward.”

Last week, BlackRock joined the Climate Action 100+ initiative, a group of 370 asset owners and managers which advocates for environmentally friendly shareholder proposals and pushes companies to align their businesses with the Paris climate agreement. 

This comes after climate activists targeted BlackRock for failing to take meaningful action on climate change to back up the environmentally friendly rhetoric found in previous editions of Mr Fink’s annual letter.

A group calling itself BlackRock’s Big Problem, which represents a consortium of climate activist organisations including the Sierra Club and Divest Invest, has implored the firm to “divest from fossil fuel companies that won’t change their practices”. It has also called on the company to use its power as a shareholder to publicly pressure “industry laggards” to improve their environmental performance.

BlackRock’s change of stance captures a stark shift in mood among several leading investors, more of whom have been persuaded in the last year that prioritising ESG considerations will drive stronger returns rather than requiring financial trade-offs.

Mr Fink has been an influential voice in corporate America’s debates about capitalism in recent years. His 2018 letter, telling chief executives they should articulate what wider social purpose their companies serve beyond generating returns for shareholders, is credited with shifting boardrooms from a focus on “shareholder primacy” to a new model focused on a wider range of stakeholders and sustainable long-term performance. 

“Climate change has become a defining factor in companies’ long-term prospects,” Mr Fink said. “I believe we are on the edge of a fundamental reshaping of finance.”

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FPIs pour in Rs 1,624 cr in Jan so far as US-China deal boosts sentiment

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Foreign portfolio investors (FPI) have infused a net sum of Rs 1,624 crore into the Indian capital markets in January so far, buoyed by the signing of the first phase of the US-China trade deal.


According to the latest depositories data, FPIs invested a net Rs 13,304 crore in equities and withdrew a net Rs 11,680 crore from the debt segment between January 1-24. This translates into a total net inflow of Rs 1,624 crore.



“After starting the year on a muted note, investments from FPIs has picked up pace and most of that flows came after US and China signed a trade deal putting the trade war between them on a pause,” said Himanshu Srivastava, senior analyst manager research at Morningstar Investment Adviser India.


The latest investments came despite challenges such as enhanced geopolitical tension between the US and Iran and dwindling domestic economic growth, Srivastava noted.


On the domestic front, “there are some signs of India shaking away the slowdown with business activity picking up and this is reflecting in the investments coming into equities. Besides, after the limit to which FPIs can invest in debt instruments has been increased, more inflows into the debt category can be expected,” said Harsh Jain, co-founder and COO at Groww.


The Reserve Bank of India on Thursday raised the investment limit for FPIs in government and corporate bonds, a move that is likely to bring in more foreign funds in the country.


According to the current norms, short-term investments by an FPI should not exceed 20 per cent of the total investment of that FPI in either central government securities (including treasury bills) or state development loans.


The same norms are applicable on investments in corporate bonds.


The short-term investment limit has now been increased from 20 per cent to 30 per cent in both the cases, the RBI said in a circular.


Additionally, the RBI has also made relaxation in the voluntary retention route (VRR) for FPI investments in debt. The investment cap through VRR has been doubled to Rs 1.5 trillion, the RBI said in another circular.


Going forward, “all eyes will now be on the upcoming Budget to get further cues. This will play major role in terms of shaping up the investment views of foreign investors and decision to invest in the Indian equity markets,” Srivastava added.



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The Pharmacist Is Out: Supermarkets Close Pharmacy Counters

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In some towns, it’s getting harder to pick up your blood-pressure pills with that gallon of milk and rotisserie chicken.

Hundreds of regional grocery stores in cities from Minneapolis to Seattle are closing or selling pharmacy counters, which have been struggling as consumers make fewer trips to fill prescriptions and big drugstore chains tighten their grip on the U.S. market.

Grocery pharmacies are getting hit on several fronts, analysts and the companies say. They are too small to wrest competitive reimbursement rates on drugs, they aren’t connected to big medical networks or insurers, and they generally lack walk-in clinics and other health services that draw many customers to CVS and Walgreens locations.

“Our establishment had a community feel, it wasn’t overly busy so we got to really care for our customers,” said

Phillip Breker,

who managed a now-closed pharmacy at Lunds & Byerlys, a Minneapolis-area grocery chain. “I also saw the numbers in the back end and how that soured in the last 10 years. The company made the right decision.”

Grocery pharmacies are the latest casualty of industry consolidation that has for years been forcing mom-and-pop drugstores to close. Even some big players have rethought the market.

Target Corp.


TGT -1.05%

sold off its pharmacy business to

CVS Health Corp.


CVS -2.86%

five years ago.

Supermarkets have viewed pharmacies as a tool to draw shoppers in. Fueled by easy profits and relatively low startup costs, legions of stores added pharmacy counters in the 1980s and 1990s. Grocery drugstores proliferated to account for roughly 14% of retail pharmacy prescriptions, according to the National Association of Drug Stores.

The number of grocery pharmacies declined for the first time in years in 2017, the latest year for which data is available, to 9,026, down from 9,344 in 2016.

Consumers are increasingly getting 90-day supplies of their medicines or getting prescriptions delivered in the mail. Those trends are resulting in a decline in foot traffic to supermarket pharmacies, which were typically located at the back of stores. Meantime, profits are ever harder to come by as the health-care industry consolidates.

CVS and

Walgreens Boots Alliance Inc.,

the nation’s biggest players, contributed more than 40% of U.S. prescription revenues in 2018, according to Drug Channels Institute, which provides research on the drug supply chain.

The chains, which now either own or have partnerships with the biggest insurers and pharmacy-benefit managers, are able to secure better deals on drug costs that largely shut out the industry’s smaller players. Pharmacy-benefit managers serve insurers and other clients by choosing which medicines to cover and pushing for lower prices from drugmakers and sellers.

CVS and

Walgreens


WBA -2.36%

also are working to transform drugstores into health-care hubs, offering services from blood testing to chronic-disease management.

“The biggest companies in health care now have pharmacists and doctors, they own medical practices, and they own urgent-care clinics,” Baird analyst

Eric Coldwell

said. Grocery pharmacies “have none of this. They have a store to go into to buy lemons and bread.”

Kroger, one of the supermarket chains that still see pharmacies as a key element of their business, says pharmacy customers tend to spend more on groceries.


Photo:

Rogelio V. Solis/Associated Press

The tougher conditions come as the entire drugstore industry copes with a shift to online shopping and shrinking profits in prescription medicines, which often disproportionately affect smaller players.

Walgreens and CVS have closed or are closing more than 300 underperforming stores, while

Rite Aid Corp.,

the No. 3 U.S. chain, is struggling to turn itself around after regulators blocked a merger with Walgreens in 2017.

Raley’s Supermarkets, a West Sacramento, Calif., chain of about 120 stores, last year shut down a third of its roughly 100 pharmacies and transferred prescriptions to nearby Walgreens, CVS and Rite Aid stores. Those grocery pharmacies had low prescription rates, were losing money and didn’t merit high operating and labor costs, according to Raley’s.

“There is the benefit of having a pharmacy relative to the grocery-sale lift and the convenience factor of having both in the store, but the economics do not work,” said

Keith Knopf,

chief executive of Raley’s.

Profitability for grocers has become harder to achieve in recent years, and pharmacies play a less important role today in attracting customers, Mr. Knopf said. Raley’s is cutting hours for the remaining pharmacies to improve profits and create efficiency. Pharmacies make up roughly 20% of Raley’s total sales.

Many grocers still view pharmacies as a key part of their business.

Kroger Co.,


KR -0.88%

the biggest U.S. supermarket chain, said its pharmacy business is expected to improve this year after lower-than-expected profits in 2019. Kroger has said pharmacy shoppers tend to be more loyal, spending three times as much as nonpharmacy customers.

“We’ve been able to connect the relationship with food and are starting to build out new revenue streams,” Kroger finance chief

Gary Millerchip

said at an investor meeting in November.

Lunds & Byerlys, the Minnesota chain, shut all 14 of its supermarket pharmacies last year. At each location, it posted a sign that has become increasingly common: “The pharmacy is now closed. Your prescription records have been transferred to Walgreens.”

Mr. Breker, the pharmacy manager, now works for Walgreens at a location in a nearby town. “I literally cried at the counter with dozens of people,” he said. “They felt a loss here.”

Write to Sharon Terlep at sharon.terlep@wsj.com and Jaewon Kang at jaewon.kang@wsj.com

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Iraqi security forces clash with hundreds of protesters in central Baghdad By Reuters

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BAGHDAD (Reuters) – Iraqi security forces firing teargas and live bullets clashed with hundreds of protesters in central Baghdad on Sunday, a Reuters witness and security sources said, following a push to clear out a sit-in camp in the heart of the capital.

At least 14 protesters were injured, the security and medical sources said.

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