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BlackRock backtracks on proxy support


BlackRock has flagged an ESG-lite agenda ahead of the 2022 corporate proxy-voting season.

In a note published last week, the BlackRock Investment Stewardship (BIS) group says the US$10 trillion manager – the world’s largest – will direct its considerable proxy power in favour of fewer shareholder proposals this year as companies face votes on more “prescriptive” and radical suggestions.

BIS says recent regulatory changes have opened up shareholder votes to “significant social policy issues” while climate-related proposals veer to new extremes.

“This has resulted in a marked increase in environmental and social shareholder proposals of varying quality coming to a vote. Our early assessment is that many of the proposals coming to a vote are more prescriptive and constraining on management than those on which we voted in the past year,” the BIS note says.

“… The nature of certain shareholder proposals coming to a vote in 2022 means we are likely to support proportionately fewer this proxy season than in 2021, as we do not consider them to be consistent with our clients’ long-term financial interests.”

Last year BlackRock backed almost half of shareholder proposals on environmental and social issues, giving weight to those centred on requiring better climate-related disclosures to investors.

But the BIS update says the current crop of shareholder-initiated corporate climate proposals include impractical measures to de-fund traditional energy firms, scrap existing fossil fuel assets and adopt business models focused exclusively on the Paris Accord 1.5°C target and set rigid ‘scope 3’ emissions reductions targets.

Companies must also assess climate policies in light of current financial and geopolitical conditions that will require more investment in both traditional and renewable energy sources for some time to come, BIS says.

“… we are not likely to support those that, in our assessment, implicitly are intended to micromanage companies. This includes those that are unduly prescriptive and constraining on the decision-making of the board or management, call for changes to a company’s strategy or business model, or address matters that are not material to how a company delivers long-term shareholder value,” the note says.

“… Although it is still early in the shareholder meeting season, we note that many of these more prescriptive climate-related proposals are attracting lower levels of investor support. In such cases, we also note that global proxy advisors ISS and Glass Lewis have been recommending that shareholders not support overly prescriptive or constraining proposals.”

While many institutional clients may direct BlackRock how to vote shares on their behalf, the manager wields enormous influence on shareholder proposals via proxies held in other vehicles – including its large, and growing, suite of index investing funds.

However, in his annual letter to corporate big-wigs this January, BlackRock chief, Larry Fink, said the manager is exploring ways to extend proxy-voting down to the individual retail investor level.

“Every investor deserves the right to be heard,” Fink said in the letter. “We will continue to pursue innovation and work with other market participants and regulators to help advance this vision toward reality.”

He also name-checked climate change, disruption of work practices and “new sources of capital” as some of the most important challenges facing investors today.

BlackRock manages, or advises on, at least $30 billion in NZ through investment partnerships with AMP Wealth and ASB but the firm also holds many other institutional or wholesale mandates as well as retail exposure through exchange-traded funds (listed both here and offshore).

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