BlackRock, the world’s largest asset manager, has put directors at 191 of the world’s most carbon-intensive firms “on watch” and said it will vote against them in 2021 “unless they demonstrate significant progress on the management and reporting of climate-related risk”.
Last year, the firm said it focused its climate engagement on a “universe of 440 carbon-intensive companies”, voting against 55 directors in the year to June 202. In its 2021 Stewardship Expectations, BlackRock has revealed that directors at 191 of those companies run the same risk in the year ahead unless they act.
Investors are increasingly targeting directors on climate issues, with two high profile asset owner-led campaigns at JP Morgan and Exxon this year. That trend looks set to continue with the recent announcement by EOS, the engagement arm of Federated Hermes, which announced it will advise investors to vote against heads of Paris-misaligned firms in 2021.
CalSTRS and the Church of England this week came out in support of efforts by a new activist investor, Engine No.1, to “refresh” Exxon’s board with the nomination of a slew of new independent directors it believes can help with the energy transition.
BlackRock also revealed in its stewardship update that it will expand its “focus universe” in 2021 to more than 1,000 high emitting companies, representing 90% of the Scope 1 and Scope 2 emissions in its portfolio. But it continues to shy away from the inclusion of Scope 3 emissions (indirect emissions, such as those from companies’ products). Earlier this year, it refused to support a major shareholder vote at Australian oil giant Santos, asking it to align all of its emissions with the Paris Agreement. Reflecting on the decision, BlackRock recommended that “any future proposals [on Paris aligned targets] be structured to provide shareholders with the opportunity to vote on each class of emissions separately”.
BlackRock, which is often criticised for its poor voting record on ESG proposals, also provided evidence in its stewardship update that shareholder resolutions are effective. It found that proposals with 30-40% support resulted in 67% of companies fully or partially meeting the requests; and that 94% of companies fully met proposals that received more than majority shareholder support.
Earlier this month, a report by campaign group ShareAction found that BlackRock supported just 12% of climate and social shareholder proposals in the last proxy season.
“BlackRock and other large asset managers have the power and responsibility to demand that corporate directors lead the way to rapid decarbonisation in line with the goals of the Paris Agreement, or be replaced by leaders who will”, said Eli Kasargod-Staub, Executive Director, US campaign group Majority Action. “BlackRock instead [last year] voted to re-elect 99% of directors across the oil & gas, electric power, and other climate-critical sectors in the S&P 500.”
BlackRock notes that since July it has “supported eight out of nine environmental proposals and three out of 13 social proposals globally”. It also reports that it has enhanced its disclosure requests around lobbying, recognising that the credibility of high emitting firms’ commitments on sustainability “may be undermined by their involvement in or affiliations with efforts that seek contradictory public policy aims”.
It said that it is also strengthening its focus on ethnic and gender diversity on large company boards, “with an eye toward more voting action against boards not exhibiting diversity in 2022.”
In January, BlackRock also added that it will provide a “more holistic commentary” on its approach to natural capital.