BlackRock to vote against directors over supply chains and deforestation – Edkins

Giant asset manager has faced criticism from NGOs

BlackRock says it will vote against company directors where it doesn’t see enough progress on supply chains and deforestation.

Michelle Edkins, Global Head of BlackRock's Investment Stewardship team, made the remarks on a webinar organised by sustainability advocacy group Ceres to mark the publication of a new investor guide on deforestation and climate change.

Edkins was asked by moderator Meryl Richards of Ceres about how BlackRock assesses companies’ management of deforestation exposure in supply chains. Richards cited BlackRock CEO Larry Fink’s highlighting the importance of the sustainability of corporate supply chains in his most recent letter to CEOs.

Edkins said the process starts with companies’ own disclosures, with input from data aggregators, NGO reports etc.

It looks at whether a company is in line with peers and then will meet with senior management.

She said: “If we think there needs to be change we set out those expectations.” Then it gives companies time to improve and if that doesn’t work it will escalate the issue to board level.

Edkins went on: “Ultimately as a long-term investor we hold directors accountable when companies fall short of really good business practices.”

She added (27.03): “If the board doesn’t make progress or doesn’t commit to progress then we would vote against directors, basically holding them to account for not protecting the long term interests of shareholders.”

She said this is an “iterative process” and that BlackRock was “adding our voice as a long-term investor to the voices of others”.

She said: “In our experience it’s really valuable to have a very similar, consistent, message delivered by different parties, across the ecosystem if you will, so that companies hear that this is a topic of concern and interest.”

BlackRock has come under criticism from NGOs such as Friends of the Earth for being silent on forest destruction.

Edkins added that the pandemic has shifted focus to resilience in supply chains; she foresaw that, in the near term, there would be better pricing of natural resources, where externalities are “factored into the pricing”.

She said BlackRock’s clients are “locked-in, long-term investors and this is why environmental and social considerations are particularly important”.

She pointed out that 90% of the firm’s $3trn of equity assets are indexed and that the “key thing” about engaging when you have an index holding is that you are “very clear in your messaging” to companies.