BlackRock on Climate Change: “Against” Votes Are Coming?
It’s that time of year again! Larry Fink – BlackRock’s CEO – is out with his annual letter to CEOs. This year, he says BlackRock is taking a more aggressive stance on sustainability. Here’s the high points:
– Continued emphasis that corporate purpose and consideration of a broad range of stakeholders is the “engine of long-term profitability”
– Encouraging companies to publish SASB-based sustainability info and disclose TCFD-based climate-related risks – BlackRock will use the disclosures and engagements to determine whether companies are adequately managing risks
– BlackRock will vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them
That last one is a biggie – but there’s not a lot of detail on what it really means. So as usual, some are skeptical of whether BlackRock’s commitments will go as far as the letter implies. But, as emphasized in a NYT article and a recent blog from Liz, the asset manager is getting more and more pressure from its investors to “walk the talk” on E&S issues. At the same time that the CEO letter went out, BlackRock published a letter to clients that details its sustainability efforts. Here’s some interesting tidbits from that:
– For active funds, BlackRock will accelerate to a “sustainable investing” approach and divest from the coal sector (i.e., as Matt Levine points out, maybe they’ll nudge clients into more sustainable investments, but a Bloomberg article explains that divestment won’t touch some of the biggest diversified producers)
– BlackRock is working with index providers to provide – and standardize – sustainable versions of flagship indexes (which will exclude businesses with high ESG risks)
– BlackRock’s engagement priorities for this year will be mapped to the UN Sustainable Development Goals
– BlackRock will start disclosing its votes quarterly – or “promptly” in the case of high-profile votes (as Liz has blogged on our “Proxy Season Blog, prompt – or even advance – disclosure of voting decisions is an emerging trend that could have a big impact)
– BlackRock’s annual stewardship report will start disclosing topics discussed during each engagement with a company
The client letter also touts that (just last week) BlackRock became a signatory to Climate Action 100+, which is led by Ceres. There is a Ceres’ press release – which explains that members of the coalition commit to engage with companies to reduce emissions, implement a strong governance framework which explains the board’s role in overseeing climate risks & opportunities, and improve disclosure. However, as a Financial Times article points out, firms are under no obligation to vote for climate change resolutions even after joining Climate Action 100+.
-Lynn Jokela, TheCorporateCounsel.net January 16, 2020
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