BlackRock, the world's largest asset manager and an outspoken proponent of using ESG to make investment decisions, is supporting fewer environmental and social shareholder proposals. The number of the proposals has surged but BlackRock is finding it more difficult to support certain investor demands by way of its proxy voting.
BlackRock supporting fewer environmental and social shareholder proposals
Money manager holds back support on proposals seen as too prescriptive
During the 2021-2022 proxy year, the 70-person BlackRock investment stewardship group had a record 3,690 engagement meetings with 2,460 unique companies in 55 markets, according to a report it published Tuesday. The vast majority of its thousands of proxy votes are related to company director elections or they are director- or compensation-related. Globally, BlackRock supported 90% of director elections and 57% of all items on agendas at shareholder meetings, consistent with the previous proxy year.
Shareholder proposals were less than 1% of all agenda items BlackRock could vote on and only some of those were environmental- or social-focused, although the number of "E&S" proposals has increased. There were 245 that went to a vote during the 2021-2022 proxy season, more than double the 105 that went to a vote the previous year.
The BlackRock investment stewardship group was in favor of few.
It supported 71, or 24%, of the environmental- and social-focused shareholder proposals in the U.S., down from 43% the year before. That was similar to most voters. On average, shareholders of U.S. companies supported 27% of environmental and social proposals, down from 36% the previous year, and "suggests that most investors took a measured, materiality-based approach in their analysis and voting on this year's proposals," the report said.
Many proposals "were unduly constraining on management or were overly prescriptive as to information sought or timeframes. Others failed to recognize the progress made such that companies had largely met the ask of the proposal," according to the BlackRock's report.
Some general examples included in the report were proposals that called for decommissioning fossil fuel assets, eliminating financing and insurance underwriting for fossil fuel projects, and a stop to fossil fuel exploration and development. "Many of these more prescriptive proposals attracted lower levels of investor support more broadly," the report said.
"In keeping with our investment convictions, our view continues to be that the best economic outcomes for our clients will come through an orderly energy transition by companies that recognizes the needs of their consumers and other key stakeholders," BlackRock said in the report. "In our work engaging with companies, and, where clients have tasked us with it, casting proxy votes, our work on climate-related issues remains unchanged in focusing on the material risks and opportunities that the energy transition poses."
BlackRock said it supported diversity, equity and inclusion-related shareholder proposals where there were insufficient disclosures. But, as an example of it rebuffing a proposal, BlackRock said it did not support a recent proposal for McDonald's asking for a third-party civil rights audit. "McDonald's currently provides clear, fulsome disclosures on their approach to DEI in relation to direct employees and other stakeholders on which they depend for their long-term success," the report said.
BlackRock will release how it voted on every board election, proposal and other issues during the 2021-2022 proxy year in August.
"This proxy season underscored our belief that a constructive stewardship approach contributes to companies making meaningful progress in their climate-related planning and disclosures, where this is a material financial risk and/or opportunity for them," the stewardship group said.
"But it also reinforced our long-held view that the pathway to decarbonization is difficult to predict and will not occur in a straight line. Consistent with that view, we have not supported certain climate shareholder proposals that are overly prescriptive or micromanage how companies should decarbonize."