BlackRock will turn up the pressure on carbon-intensive companies to transition to a low-carbon economy, push for more qualified and diverse corporate directors, back up more shareholder proposals on sustainability issues, and scrutinize companies' political activity, according to a 2021 Stewardship Expectations report released Thursday.
The asset manager focused on 440 carbon-intensive companies during the last proxy season ended June 30, but will now expand that scrutiny to 1,000 companies in 2021, the report said. Actions against the 440 companies included voting against 55 directors and putting 191 companies on watch for similar actions. The new universe of 1,000 companies represents 90% of major global emissions.
Part of the new focus involves spending more time assessing the impact of climate change on corporate business models. "We expect companies to disclose their plans" for getting to reduced global warming or net zero emissions by 2050, Michelle Edkins, managing director and global head of BlackRock's investment stewardship team, said in an interview. "This is going to be a multiyear transition and we want to get a sense of how accelerated the transition is for them," she said. "There is growing recognition that more could be done."
Corporate board members will have to play a broader role in helping companies reach ESG goals demanded by investors. "The key change is we see sustainability as the board's responsibility," she said. BlackRock will be looking for a broader mix of corporate board members, including new directors that can bring a fresh perspective, Ms. Edkins said.
"We will also be highlighting the importance of companies having a clear approach to diverse and inclusive employment practices," with data and narratives on how companies will achieve that goal, she said. "It's a clearer ask. It's show, not tell."
Companies will also be pressed to disclose whether lobbying activity of their trade associations aligns with their stated policy positions on sustainability issues. "This is more about risk management. We see increasing risk from major trade associations activity that is contradictory" to companies' official positions, Ms. Edkins said.
BlackRock has been criticized by sustainability advocates for not strongly supporting other shareholder proposals on sustainability, which could change in 2021, Ms. Edkins said.
"Where a proposal is asking a company to address a material business risk and we agree a company could manage it better, we would be more inclined to support shareholder proposals," particularly those related to director elections, she said. "We are going to be using shareholder proposals more frequently."
Eli Kasargod-Staub, executive director of Majority Action said in a statement that BlackRock needs to join other asset managers that are coupling clear demand for climate action with votes against directors if companies fail to comply.
"BlackRock and other large asset managers have the power and responsibility to demand that corporate directors lead the way to rapid decarbonization in line with the goals of the Paris Agreement," he said, "or be replaced by leaders who will."