BlackRock support for shareholder proposals targeting environmental, social and governance (ESG) factors dropped from almost half to just 7 per cent over the two years ending June 30.
According to the latest annual BlackRock investment stewardship report, the world’s largest fund manager backed 26 out of 399 ESG-related shareholder proposals it voted on during the 12 months.
For the 12 months ending June 30, 2021, BlackRock favoured 47 per cent of shareholder ESG proposals, dropping to 22 per cent in the following annual period.
The number of shareholder-induced ESG resolutions also jumped over the two years from about 170 in the 2021 period to almost 400 in the latest reporting timeframe.
Joud Abdel Majeid, BlackRock global head of investment stewardship, says in the report that the increased quantity of shareholder-initiated ESG corporate proposals over the 2022/23 year also saw a qualitative decline.
“We observed a greater number of overly prescriptive proposals or ones lacking economic merit. Importantly, the majority of these proposals failed to recognize that companies are already meeting their asks. Because so many proposals were over-reaching, lacking economic merit, or simply redundant, they were unlikely to help promote long-term shareholder value and received less support from shareholders, including BlackRock, than in years past,” Majeid says in the report.
“Simply measuring stewardship by the number of votes for or against proposals, however, is an oversimplification of the issues that investors must contemplate. The binary nature of a proxy vote cannot reflect the complexity and multitude of considerations that go into a vote decision, drawing on company disclosures and our engagements with company leadership. It fails to reflect the unique circumstances in which a company operates, and the progress made to better align their practices with delivering financial performance over the long-term.”
The BlackRock shift away from supporting shareholder ESG proposals was in line with wider trends, according to the Financial Times (FT), which cites figures showing the median vote in favour dropped to 15 per cent in 2023 compared to 25 per cent the previous year and 32 per cent in 2021.
State Street, the third-largest passive asset manager in the world, also voted in favour of fewer shareholder ESG resolutions in the first half of this year, the FT notes, backing 32 per cent against 44 per cent over the same period in 2022 and 49 per cent during the six months to June 30, 2021.
BlackRock has moved to ‘democratise’ proxy voting over the last year or so, allowing individual institutions and retail investors in some funds to vote directly on corporate proposals.
ESG investing has emerged as a political lightening rod in the US, particularly, over the last couple of years with several states dumping managers such as BlackRock from government mandates over such concerns.
Larry Fink, BlackRock chief, earlier this year vowed to stop using the ESG term, claiming the three-letter abbreviation had become “weaponised”.
The almost US$10 trillion BlackRock along with Vanguard and State Street own about 15-20 per cent of most large US listed companies, the FT reports, via large passive holdings. Index managed by the big three passive firms hold similar influence in most global markets.
In NZ, for example, BlackRock directly influences about a quarter of the KiwiSaver market under investment management agreements with ASB and AMP. The US firm is also in talks with ANZ Investments – the largest KiwiSaver provider and retail funds manager – to provide risk management and administration services.
BlackRock grabbed further headlines in NZ this August after releasing plans to raise $2 billion for a green energy fund, endorsed by the government.