BlackRock, the largest asset manager in the world, said it will likely vote to support fewer climate proposals from companies in its investment portfolio in 2022 than it did in 2021 because those climate proposals coming up for a vote this year are more exacting and demanding than in previous years.
On Tuesday, BlackRock’s Investment Stewardship team published a preview of how it’s going to vote in the current season of company shareholding meetings. Blackrock’s Investment Stewardship (BIS) is a team of financial professionals that liaises between corporate governance of the companies it invests in for the benefit of its clients.
In 2021, BlackRock voted in favor of 47% of environmental and social shareholder proposals (81 of 172), the BIS said in its note.
In the current season, BlackRock is “likely to support proportionately fewer this proxy season than in 2021, as we do not consider them to be consistent with our clients’ long-term financial interests,” the BIS note says.
BlackRock will not vote for company changes that “implicitly are intended to micromanage companies,” BIS said. “This includes those that are unduly prescriptive and constraining on the decision-making of the board or management, call for changes to a company’s strategy or business model, or address matters that are not material to how a company delivers long-term shareholder value.”
Instead, BlackRock will favor measures which improve a company’s disclosure of information that help investors understand how well a company is positioned to adapt to climate-related changes. BlackRock wants to see specific “quantitative” information about a company’s scope 1 and 2 emissions and a company’s emissions reductions plans.
Scope 1 emissions are those that are directly connected to a company’s operations, including emissions from boilers, furnaces or vehicles that a company operates, according to the U.S. Environmental Protection Agency. Scope 2 emissions are those associated with the electricity, steam, heat or cooling that a company purchases, and scope 3 emissions, the much more complicated segment of emissions to track and monitor, result from a company’s supply chain.
Environmental advocates argue the note from BIS is a sign that BlackRock is softening on its resolve to bring climate responsibility to the financial sector.
BlackRock CEO Larry Fink’s 2020 letter to other corporate executives is seen as a watershed moment for climate. In that letter, Fink said, “Climate change has become a defining factor in companies’ long-term prospects.” And Fink, literally in bold type face, said “I believe we are on the edge of a fundamental reshaping of finance.”
Tuesday’s letter, however, was a disappointing step back from that early leadership, according to Adele Shraiman at the Sierra Club.
“Larry Fink claims to be a climate leader, but somehow there’s always a new reason why BlackRock can’t actually use its power to move meaningful climate action forward. The question of whether these resolutions were overly ‘micromanaging’ was asked and answered when the SEC rejected calls from banks to block shareholders from voting on them, but BlackRock would rather stand in the way of commonsense climate proposals and let big polluters off the hook,” Shraiman said in a written statement.
So too, according to Moira Birss, the climate and finance director at Amazon Watch, a non-profit advocacy organization.
“BlackRock claims that proposals to end the expansion of fossil fuel production are ‘too prescriptive.’ Yet the scientific consensus, and even the International Energy Agency, make clear that ending new fossil fuel production is the minimum needed to avoid catastrophic climate change that will negatively impact all investors — not to mention every living being on the planet. Shareholder proposals have evolved in line with what we need to address the escalating crisis; BlackRock’s voting has not.”
BlackRock did not immediately respond to request for comment.
In its BIS letter, however, BlackRock did say current geopolitical concerns are impacting its voting strategy this year also. For example, the war in Ukraine and resulting global efforts to wean off Russian oil are impacting global energy markets.
“Net exporters of energy are likely to be required to increase production, while net importers are expected to accelerate efforts to increase the proportion of renewables in their energy mix,” BlackRock said. “This set of dynamics will — at least in the short- and medium-term — drive a need for companies that invest in both traditional and renewable sources of energy and we believe the companies that do that effectively will produce attractive returns for our clients.”