BlackRock’s support for US shareholder proposals on environmental and social issues fell by nearly half in this year’s annual meeting season, as the world’s largest money manager voted for just 24 per cent of them.
The group had warned of this outcome in May when it argued that shareholder proposals were becoming too prescriptive and that Russia’s invasion of Ukraine had changed the investment calculus.
“Many climate-related shareholder proposals sought to dictate the pace of companies’ energy transition plans with little regard to the disruption caused to their financial performance, given continued demand from consumers. Others failed to recognise the progress made,” BlackRock said in a report on its voting released on Tuesday. “These factors made these proposals less supportable.”
BlackRock’s shift has been far more dramatic than most other investors. Total shareholder support for environmental and social proposals dropped from 36 per cent of votes cast in last year’s meeting season to 27 per cent this year, according to ISS data analysed by BlackRock. At BlackRock the decline was from 43 per cent to 24 per cent.
Support for environmental and social proposals from State Street Global Advisors, another very large asset manager, fell from above 25 per cent last year to roughly 20 per cent this year, according to preliminary calculations. Vanguard, also a top three manager, has not yet released any voting information.
A separate analysis of Esgauge data by the Conference Board found that investor support on environmental proposals in particular fell from 37 per cent in 2021 to 33 per cent this year.
In recent months BlackRock and its founder Larry Fink have come under particular criticism from Republican party politicians who argue that they are pushing a subversive “woke capitalism” that will handcuff companies, drive up consumer prices and sacrifice jobs. Both BlackRock and State Street have faced questions from state governments in Texas and West Virginia, which plan to boycott financial services groups that “discriminate” against fossil fuels.
Big asset managers want “to appear to be responsible stewards”, said Lucian Bebchuk, a professor at Harvard Law School. But they also seek “to accommodate corporate managers, and avoid adversarial relationships with them . . . and to reduce the odds of a political and public backlash against their power”.
“This combination of incentives explains why BlackRock would want to signal its contribution and commitment to addressing climate change by supporting more disclosure — but not wanting to go beyond that,” he said.
BlackRock, which manages $8.5tn, said that it continues to hold companies accountable on issues that affect investors’ long-term returns. Globally, it did not support management on at least one proposal at 7,024 companies, or 43 per cent of the total.
“We haven’t changed. The context is changing around us,” the asset manager said.
BlackRock also voted against or abstained on directors 10 per cent of the time, affecting 6,555 individual directors and one-third of all companies where it voted, roughly the same as last year. In the US, the most common reason for a negative director vote was concern about lack of diversity, while in Europe it was because the director had too many other commitments, and in Asia it was due to lack of independence.
State Street said it voted against at least one director at 11.6 per cent of meetings in the first half of 2022, compared to 11.2 per cent in 2021.
“While shareholder proposals are an important pathway for raising awareness of material E&S issues to the boards, we believe that voting on the election of directors at annual general meetings is a much more powerful way to hold corporates accountable,” State Street said.
