BlackRock urged to close gap between rhetoric and reality on climate action

Jan 15, 2019
Twelve groups call on company CEO in far-reaching letter

Twelve investor and shareholder advocacy groups have written to BlackRock, calling on it to improve its climate-related shareholder resolutions and engagements.

This comes in anticipation of BlackRock CEO’s yearly letter to companies reminding them of their need to address global strategic challenges and deliver long-term value for shareholders and society.

The letter calls out the fund manager for its own ‘poor contribution to environmental goals’, especially in light of growing urgency to tackle the risk of climate change to the global economy. It also says BlackRock consistently votes against shareholder climate proposals and has a worse track record than other large global asset managers.

Trillium Asset Management, Boston Common Asset Management and Swiss pension fund group Ethos join nine campaign groups including ShareAction and ClientEarth in writing to Larry Fink, CEO of the world’s largest money manager.

The letter comes in spite of Fink being a strong advocate of the ESG narrative in public announcements and despite BlackRock stating in 2018 that it had included ‘climate risk as one of [its] engagement priorities’.

Specifically, signatories ask Fink to improve BlackRock’s stewardship of high-carbon companies by supporting more shareholder climate resolutions in the 2019 AGM season. By doing so, BlackRock can ‘maximize long-term value creation for the investments it manages on behalf of millions of savers around the world,’ the letter notes.

The letter highlights several shareholder proposals on the ballot at company shareholder meetings this year that it asks BlackRock to vote in favor of. These include, but are not limited to:

– A resolution at Wells Fargo to set targets for emissions reductions in its loan and investment portfolio in line with the goals of the Paris Agreement

– A resolution from the Church of England and New York State Common Retirement Fund for ExxonMobil to reduce the carbon emissions of its products

– Resolutions on corporate lobbying at Duke Energy, JPMorgan Chase and ExxonMobil.

The signatories say the urgent need for action on climate change has been highlighted by the findings last September from UN scientists that we have just over 11 years to avert the worst effects of climate change on the world and the financial system.

Catherine Howarth, chief executive of campaign group ShareAction, says in a statement: ‘BlackRock is the biggest but not yet the best when it comes to protecting clients and pension savers from climate-related risks. We hope it will close the gap between rhetoric and real action in 2019’s proxy season.’

Jonas Kron, senior vice president at SRI specialist Trillium Asset Management, adds: ‘As the Trump administration’s agenda makes matters worse, BlackRock has the opportunity to push for climate solutions that will benefit its customers, portfolios and the economy upon which they depend.

‘As many states, most major governments and a growing number of private sector leaders move to support the Paris Climate Agreement, BlackRock cannot afford to be a laggard.’

James Thornton, CEO at ClientEarth, also notes: ‘BlackRock has legal obligations as a fiduciary for the investments of millions of people around the world – if it does not take stronger action to protect investors from climate risk in 2019, it will be failing to fulfill those duties.

‘BlackRock manages a huge volume of passive investments – [so] where a company fails to meet Mr Fink’s standards on climate, there is little scope for BlackRock to sell the shares. That means wielding its considerable influence as a shareholder will be fundamental to living up to its fiduciary duties.

‘As such, Fink must make it clear that BlackRock expects companies to set transparent, measurable targets for aligning their business strategy with the Paris Agreement, and state publicly that BlackRock will vote in favor of shareholder resolutions on this issue this year.’

Tracey Davies, executive director of responsible investing group Just Share, also observes: ‘BlackRock holds significant positions in carbon-intensive companies in emerging markets. These companies are often overlooked by progressive global institutional investors.

‘In South Africa, which is one of the world’s biggest carbon emitters and where local institutional investors are failing to tackle climate risk, the example set by BlackRock will have a significant impact on actions taken by other investors.’

Lauren Compere, managing director of sustainable investment manager Boston Common Asset Management, adds: ‘This proxy season we hope to see BlackRock take action to back its words by voting with climate resolutions and publicly supporting climate change-related initiatives rather than just opting for private engagement conversations.  

‘As a passive investor it is vastly underutilizing its proxy voting assets. Arguably, it is not fully executing its fiduciary duty by not voting in favor of shareholder resolutions aligned with its own expectations that carbon-intensive sectors move rapidly toward adopting business strategies compliant with the Paris Goals.’

In reply, BlackRock issued a statement defending its approach and record: ‘BlackRock believes that climate change presents significant investment risks that have the potential to impact the long-term value of many companies, and prioritizes climate risk in our evaluation of and discussion with companies.

‘Our process emphasizes engagement before voting because we believe that is the most effective way to achieve productive outcomes for our clients’ long-term interests. As reported on our website, BlackRock’s Investment Stewardship team engaged over 230 companies globally on climate risk in the year to June 2018, significantly more than the approximately 30 proposals which had shareholder proposals on the agenda of their shareholder meeting.’ 

The 12 signatories to the letter are As You Sow, the Australasian Centre for Corporate Responsibility, Boston Common Asset Management, ClientEarth, Croatan Institute, Ethos, Just Share, Majority Action, Market Forces, Preventable Surprises, ShareAction and Trillium Asset Management.

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