Liberal-leaning US pension fund leaders and politicians have warned BlackRock and other big asset managers against backtracking on their commitment to environmental, social and governance causes, after a sharp drop in support for shareholder proposals at annual meetings.
New York City comptroller Brad Lander accused BlackRock, the world’s largest money manager, of caving in to a “misinformed and shortsighted war against ESG at the behest of special interests”.
His comments came after data released this week showed that BlackRock voted in favour of just 7 per cent of environmental and social-related proposals at company annual meetings in the 12 months to June.
The US$9.4 trillion asset manager has been a frequent target of attacks from US Republicans who have accused it of becoming too “woke”, and chief executive Larry Fink said earlier this year he had stopped using the term ESG because it had become too divisive.
BlackRock denies the criticism influenced its voting record. Investor support for shareholder proposals has fallen across the board since a rule change in 2021 made it harder for companies to block their inclusion on proxy ballots. However, the decline at BlackRock has been particularly sharp.
The median support for environmental and social shareholder proposals so far this year has fallen to 15 per cent, according to Institutional Shareholder Services data, from 25 per cent last year and 32 per cent in 2021. BlackRock supported 47 per cent of such proposals in 2021 and 22 per cent last year.
Michael Frerichs, the Illinois state treasurer, said: “We want to make sure they’re committed to addressing the risks, and we think it’s important everyone we work with is managing risk responsibly and is not letting political pressure influence the service they provide.
“We understand that there are years where there are lower-quality proposals, but if this becomes a trend over multiple years, then we’ll be concerned,” Frerichs added.
Tobias Read, treasurer for the state of Oregon, did not comment directly on BlackRock’s latest data but said he would be emphasising “the importance of recognising the risks that ESG issues pose” to “all our partners and the companies we invest in”. Oregon invests hundreds of millions of dollars into BlackRock funds and owns a direct stake in the asset manager, according to filings.
Some institutional investors make their own voting decisions at shareholder meetings rather than delegate the responsibility to fund managers. The New York City and Massachusetts retirement systems, for example, said that they vote based on their own guidelines.
However, many do hand off responsibility. Asset management giants BlackRock, Vanguard and State Street collectively control the shares of between 15 and 20 per cent of many S&P 500 companies, giving them significant sway over the outcome of proxy votes.
“BlackRock has a responsibility to use its votes to send a clear and consistent message regarding the need to manage climate-related and human-capital related risks,” said New York City’s Lander, who is responsible for about US$250 billion of investments across five pension funds.
BlackRock declined to comment on its relationships with New York City and other clients. But it said: “Our proxy voting decisions are made solely to advance the financial interests of our clients. For clients who would like to play a more active role in proxy voting themselves, we also have led the industry in providing them that option through our Voting Choice initiative.”
The money manager said earlier in the week that its falling support for climate-related votes was a response to the proliferation of inappropriate proposals.
“While BlackRock gets all the attention I don’t think they’re alone,” said Amy Borrus, executive director of the Council of Institutional Investors, an industry group. “Many asset managers report that they voted for fewer environmental shareholder proposals this year than last year because they’re seeing too many granular... [or] overly prescriptive proposals.”
Written by: Nicholas Megaw, Brooke Masters and Madison Darbyshire in New York
© Financial Times