Dutch pension fund manager PGGM has criticised what it calls a “mismatch” between US asset management titan BlackRock’s stated ambitions on ESG topics like climate change and its actual voting decisions at company AGMs.
PGGM – which has more than €20bn managed by BlackRock – conducted analysis of BlackRock’s voting in the context of a shareholder resolution filed by the Stephen M Silberstein Revocable Trust, which called for BlackRock to report on its proxy voting guidelines and how they influence its pay votes. The motion went to the vote at BlackRock’s AGM this week and got 4% support, with PGGM and fellow pension fund giant, CalPERS, backing it.
PGGM said: “According to various sources, BlackRock appears to be in agreement with most executive say-on-pay proposals in the US. In addition our own research found that at times there seems to be somewhat of a mismatch between the company’s ambition on topics like climate change and (some of) its actual voting decisions.”
In March, BlackRock advised its own shareholders to vote against the proposal – saying it could threaten the independence of its in-house Stewardship Team headed by Michelle Edkins and represented “intrusive oversight”.
“Taking a subset of votes that BlackRock cast throughout the year, we found that in quite a few cases they voted against shareholder proposals such as those that were related to climate change risks,” Rogier Snijdewind, Senior Advisor Responsible Investment at PGGM Investments, told RI.
“This while BlackRock was quite outspoken in the media that risks of climate change should be factored into investors’ views on companies.”
BlackRock manages €23.2bn for PGGM via the PGGM Developed Markets Equity PF Fund (€21.1bn) and the PGGM Emerging Markets Equity PF Fund (€2.1bn), although BlackRock does not vote or engage on PGGM’s behalf, which does those activities via its in-house responsible investment team.
It all comes as BlackRock Chief Executive Larry Fink has become highly visible on corporate governance and long-termism, with his now annual letter to CEOs. His most recent missive, in February, stated: “Over the long-term, environmental, social and governance (ESG) issues – ranging from climate change to diversity to board effectiveness – have real and quantifiable financial impacts.”He spoke of a “multi-year effort” to integrate ESG into its investment processes.
It follows research produced by shareholder advocacy group As You Sow, which claimed that BlackRock only rejected three CEO pay packages at the 99 companies in the S&P 500 in which it holds a stake.
Notes published by PGGM on its proxy voting website urge BlackRock to take a “more diplomatic approach (through engagement) to change (the behaviour of) the companies”.
PGGM adds: “While engagement in itself can be very effective, PGGM believes that the efficacy of engagement can be further enhanced by fully incorporating our views on environmental, social and corporate governance subjects, including Executive Compensation, into our voting behaviour. We would encourage all financial institutions and investors to do so and bring their proxy voting policies and guidelines in line with their long term focus.”
In a statement BlackRock provided to RI, the asset manager said it prefers to engage directly with senior management and directors, adding that it engaged with 700 companies in the US in 2015, with executive compensation a focus of 45% of these. It adds that executive compensation that outweighs company performance is a “symptom of broader governance failures”.
The statement continues: “If we determine that issues will not be remediated through engagement, we vote against specific proposals and will generally also vote against the directors on related committees. For the 2015 proxy season, BlackRock voted against 16% of management proposals related to compensation and 162 directors serving on Compensation Committees.”
Similar shareholder proposals at peer firms T. Rowe Price and Franklin Resources have gained 8% and 13% investor support this year.
PGGM’s Snijdewind said: “As BlackRock is an important provider of ours we are in continuous discussions on various topics, including their approach on ESG issues.
“The reason why we focused on BlackRock was because of our relationship with them but we also supported a shareholder proposal at T Rowe Price similar to the one at BlackRock but then asking for the incorporation of climate change into their proxy voting policies.”