BlackRock: Support Climate-Critical Resolutions
Research indicates that the global economy must reduce carbon emissions by 50% or more within the next decade to limit average global surface temperature rise to 1.5 ̊C. To have any chance of success, corporations across the energy, utility, automotive, and financial services sectors must rapidly alter their business practices. Those companies' largest shareholders must encourage these changes and hold to account those management teams that fail to act. Unfortunately, BlackRock, the largest asset manager globally, has ignored its own public statements by almost uniformly supporting fossil fuel industry management teams while also voting down many shareholder resolutions intended to address the climate crisis. According to research conducted by Majority Action, BlackRock used its proxy votes to support just 3 of 36 “climate-critical” shareholder resolutions in 2020 while it supported nearly all company-proposed directors at auto, utility, and oil & gas companies.(1) BlackRock’s CEO, Larry Fink, received wide praise earlier this year for making commitments to sustainable investing and environmental stewardship; however, wide disparities exist between the asset manager’s public statements and its actions on climate change.(2)
Inevitable government and regulatory responses to climate change are expected to decrease global market cap values by $2.3 trillion, according to PRI.(3) Additionally, the United States' Fourth National Climate Assessment asserts that if emissions continue to grow, “annual losses in some economic sectors are projected to reach hundreds of billions of dollars by the end of the century—more than the current gross domestic product (GDP) of many U.S. states."(4) These are just two examples from a growing body of research indicating that a failure to curb emissions will negatively impact the global economy, capital markets, and BlackRock’s core business of asset management.
BlackRock must adhere to more explicit voting guidelines. For example, BlackRock’s Proxy Voting Guidelines state, “we believe that when a company is not effectively addressing a material issue, its directors should be held accountable. We will generally engage directly with the board or management of a company when we identify issues. We may vote against the election of directors where we have concerns that a company might not be dealing with E&S factors appropriately.”(5) By this standard, BlackRock’s votes indicate that nearly all fossil fuel and utility companies are effectively addressing the long-term threat of climate change. Since there is little data to support this assumption, BlackRock must develop additional language within its Guidelines to ensure that practices more accurately reflect stated positions.
Regarding shareholder resolutions, BlackRock’s Guidelines state, “sometimes we may reflect such concerns by supporting a shareholder proposal on the issue, where there seems to be either a significant potential threat or realized harm to shareholders’ interests caused by poor management of material E&S factors.”(5) We ask that this guideline be modified to lead to more support of climate-critical resolutions with new language to explicitly support those resolutions endorsed by the Climate Action 100+ Investor Coalition.
(1) Majority Action. 2020. Climate in the Boardroom: How Asset Manager Voting Shaped Corporate Climate Action in 2019. https://static1.squarespace.com/static/5d4df99c531b6d0001b48264/t/5d8006692e5b035cf0d2b17f/1568674165939/assetmanagerreport2019.pdf
(2) Blackrock. 2020. “A Fundamental Reshaping of Finance.” https:// www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
(3) Principles for Responsible Investment. 2019. Impacts of the Inevitable Policy Response on Equity Markets. https://www.unpri.org/what-is-the-inevitable-policy-response/4787.article
(4) USGCRP. 2018. Impacts, Risks, and Adaptation in the United States: Fourth National Climate Assessment, Volume II. U.S. Global Change Research Program, Washington, DC. https://nca2018.globalchange.gov/
(5) BlackRock. Blackrock Investment Stewardship: Corporate Governance and Proxy Voting Guidelines for US Securities. https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf