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INVESTING/PORTFOLIO STRATEGIES

BlackRock highlights climate risk disclosure among its stewardship focuses for 2017-18

Enhanced climate risk disclosure will be an area of focus for BlackRock (BLK)'s investment stewardship team as it engages with portfolio companies over the next year, said an announcement on the money manager's website Monday.

“Given climate risk is a systemic issue, we believe disclosure standards should be developed that are applicable to listed companies across each market and, ideally, that are globally consistent,” BlackRock said in the announcement.

The money manager added that over the next year it will be encouraging companies most exposed to climate risk to adopt the reporting framework of the Financial Stability Board's Task Force on Climate-Related Financial Disclosures.

Deborah Winshel, managing director, global head of impact investing at BlackRock, is a member of the task force.

The other themes BlackRock's investment stewardship team will focus on in 2017 and 2018 are governance, corporate strategy, compensation and human capital management, the announcement said. BlackRock is the world's largest money manager with $5.1 trillion in assets under management as of Dec. 31.

Specifically, under governance, BlackRock said that it will work with companies to better understand their progress on improving gender balance in their boardrooms and that it will hold nominating and/or governance committees accountable if progress is not made within a reasonable time frame. The money manager added that it will further encourage proxy access; annual elections of board directors and board evaluations; one-share, one-vote structures; and climate competent boards.

Under corporate strategy, BlackRock said it expects companies to “succinctly explain the long-term strategic goals management is working toward, the milestones that will demonstrate progress, and any obstacles anticipated or incurred,” and that each year, these explanations be refreshed to reflect the changing business environment.

Under compensation, BlackRock said it expects “executive pay policies to use performance measures that are closely linked to the company's long-term strategies and goals,” ensuring that “executives are rewarded for delivering strong and sustainable returns over the long term, as opposed to short-term hikes in share prices.” BlackRock added that where executives' pay seems “out of line” with performance, companies' public disclosures should provide detailed justification. Where concerns persist, BlackRock said it could engage with independent directors or could vote against the election of compensation committee members.

Finally, under human capital management, BlackRock said that in light of market trends like skilled labor shortages, uneven wage growth and transformative technology, the firm wants to know if and how boards are interacting with management to improve employee development; diversity and equal employment opportunity; health and safety; labor relations; supply chain labor standards; and other aspects of human capital management.