BlackRock is ramping up its climate-related engagement with companies in carbon-intensive sectors, according a report released Tuesday by BlackRock's investment stewardship group.
"Climate risk is investment risk" and climate-integrated portfolios can produce better long-term, risk-adjusted returns, BlackRock said in the report.
While BlackRock has discussed sustainability issues with companies for years, "our investment stewardship team has intensified its focus and dialogue this year with companies facing material sustainability-related risks," either transition risk as the world moves toward a low-carbon economy, or physical climate risk, the report said.
While BlackRock began writing to companies in 2017 about improving their climate-risk disclosures, in 2020 the firm explicitly asked companies to report in line with the Task Force on Climate-related Financial Disclosures' recommendations.
The increased focus this year led BlackRock to call out 244 companies, including Exxon Mobil, for inadequate disclosure or insufficient progress integrating climate risk into their business models, and to vote against 53, or 22% of them. The report cited corporate leadership unresponsive to investors' concerns about climate risk, or inadequate disclosure as the reasons behind the votes.
The remaining 191 companies are now on watch and at risk of votes against management in 2021 unless they make significant progress, said the report, which noted that some of those companies had legitimate reasons for delayed progress on climate issues in 2020, including the economic crisis and threats to business models from the COVID-19 pandemic.
Voting actions, typically against company directors or for shareholder proposals, "is how we hold companies accountable when they fall short of our expectations," BlackRock said.
On the good list, BlackRock identified more than 60 companies with disclosures, targets and business practices on climate issues that align with its expectations.
In the report, BlackRock committed to greater transparency in its investment stewardship activities, particularly related to climate risk. That follows a January message to clients that it is making sustainability central to the way it invests, manages risk and executes stewardship responsibilities. Asset managers, including BlackRock, have been under increasing pressure from climate activists to be more forceful with companies on ESG issues.