‘Less supportable’: BlackRock pairs back support for US shareholder climate proposals

BlackRock’s support for shareholder environmental and social proposals has fallen significantly in the US, with the world’s largest asset manager voting in favor of less than a quarter of proposals over the past year, according to its latest proxy voting report.

Covering the annual meeting season through to July 2022, yesterday’s report reveals BlackRock supported just 24 per cent of environmental and social shareholder proposals at US companies over the period, marking a major drop from the 43 per cent it voted in favor of the previous year.

Given the number of sustainability-focused proposals put forward by shareholders at BlackRock-managed companies rose by 133 per cent over the period, it means the number it backed fell from 81 proposals last proxy season, to just 71 this year, the report reveals.

In the introduction to the report, Sandy Boss, global head of investment stewardship at the asset manager, claimed shareholder proposals had become “less supportable” in the 2021-22 proxy year due to a number of factors.

Interventions proposed by shareholders had been more prescriptive than in prior years, she said, noting that many financial sought to “dictate the pace of companies’ transition plans … with little regard to company performance”. Other proposals, she noted, had failed to recognise that companies “had largely already met their ask”.

“This proxy season underscored our belief that a constructive stewardship approach contributes to companies making meaningful progress in their climate-related planning and disclosures, where this is a financial risk and/or opportunity for them. Where this is a material risk and/ or opportunity for them,” Boss wrote. “But it also reinforced our long-held view that the pathway to decarbonisation is difficult to predict and will not occur in a straight line. Consistent with that view, we have not supported certain climate shareholder proposals that are overly prescriptive or micro-manage how companies should decarbonise.”

The report argues falling support for environmental and social proposals from shareholders last year was not unique to BlackRock, with support for such proposals at all US public companies dropped from 36 per cent to 27 per cent over the proxy season.

BlackRock said the decline suggested that “most investors took a measured, materiality-based approach in their analysis and voting on proposals this proxy year”.

It cites examples of overly prescriptive proposals as those that called for decommissioning fossil fuel assets, the elimination of financing and insurance underwriting for fossil fuel projects, and procession of fossil fuel exploration and development.

“When assessing shareholder proposals, we evaluate each proposal on its merit, with a singular focus on its implications for long-term value creation,” the report states. “We consider the business and economic relevance of the issue raised, as well as its materiality and the urgency with which we believe it should be addressed.”

BlackRock first warned several months ago that its 2022 climate-related shareholder proposals had become more prescriptive compared to the previous year, in the wake of new guidance from the US Securities and Exchange Commission that broadened the scope of permissible proposals that address shareholder social policy issues . The note acknowledged there were “unique dynamics” at play during this year’s season, arguing that Russia’s invasion of Ukraine had made investments in companies that invest in both fossil fuel and renewable energy sources of energy more attractive.

It also claimed to have seen a growing trend whereby companies, particularly in Europe, were choosing to introduce management proposals on climate action plans and progress, alongside those introduced by shareholders. In these instances, Blackrock said it and other investors were “increasingly inclined to support the management proposal”.

BlackRock has become vocal about environmental sustainability in recent years, with its CEO Larryk using his annual letter to shareholders and CEOs to make the case for the net zero transition, and also to tout the firm’s latest coal exclusion policies, as well as well as other measures aimed at slashing emissions from the firm’s giant asset portfolio.

But the firm’s vocal claims stance on climate has faced criticism amid is at odds its actual investment activity, given BlackRock remains one of the world’s largest investors in both fossil fuel companies and linked to deforestation.

A report published last year calculated that BlackRock holds $85bn in coal companies, and in January last year the company completed a $15bn deal with Saudi Aramco to acquire 49 per cent of its gas pipeline subsidiary.

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