BlackRock to focus on board diversity, climate risk plans in 2022

BlackRock will push companies to have more diverse boards and to demonstrate their resiliency to climate risk, according to 2022 policy updates released Tuesday by BlackRock's investment stewardship group.

For U.S. companies, boards should aspire to 30% diversity, with at least two female directors and at least one from an underrepresented group, and the largest companies should lead, according to the policy.

In the U.K., BlackRock will push companies to have at least 33% female directors and at least one director of color.

In the last proxy season covering the 12 months through June 30, BlackRock had nearly 2,200 engagements on board diversity and voted against 1,862 directors at 975 unique companies globally for lack of board diversity.

On climate risk, it will continue pushing companies to disclose a net-zero-aligned business plan consistent with their business model and sector. In 2022, that will include asking companies to demonstrate that their plans are resilient under likely decarbonization pathways toward a global goal of limiting warming to 1.5 degrees Celsius.

It also wants to see how companies are factoring in climate-related issues related to energy supply and ensuring that workers are not left disadvantaged in the transition to net-zero economies.

Last proxy season, BlackRock had more than 2,300 engagements on climate issues and voted against 319 companies, including the re-election of 255 directors.

For companies with ESG criteria in their executive compensation programs, "those metrics should be rigorous, aligned with a company's strategy and business model, and linked to company performance," the policy said. More flexibility for companies using metrics was added "in response to inquiries from companies, as well as greater interest among other stakeholders," the report said.

As sustainability reporting evolves, BlackRock plans to ask companies to report according to recommendations of the Task Force on Climate-related Financial Disclosures but will also recognize standards other than those from the Sustainability Accounting Standards Board, and push for industry- or company-specific metrics as well.

The newly formed International Sustainability Standards Board unveiled in November at COP26 in Glasgow, Scotland, to develop a single, globally consistent set of baseline sustainability reporting standards "will help drive progress toward the convergence needed to improve the quality of information available to investors and other stakeholders," the stewardship report said.

BlackRock will update its 2022 engagement priorities in the first quarter of the year.