BlackRock Bluntly Tells Companies They’re ‘On Watch’

BlackRock has taken a highly public stance on climate action over the past several years after successive shareholder letters from CEO Larry Fink. And this week, the investment firm approaching $7 trillion in assets under management explained how it will wield a big carrot (engagement) and an even larger stick (voting during proxy season) to hold companies accountable.

In a recent report, BlackRock explained how as of this week, it has identified 244 companies that were making “insufficient progress” on integrating climate-related risks within their business models or public disclosure statements. Furthermore, BlackRock took voting action on more than 20 percent of those companies, or 53 in total. The asset manager said it notified the remaining 191 companies they are “on watch,” and if they do not take significant action going into 2021, it will vote against their management come proxy season.

BlackRock says that in looking out for its own clients, it’s particularly focused on carbon-intensive industries with a large market capitalization that also contribute a significant amount of carbon emissions in the regions where they are based.

As news outlets including the Financial Times reported, companies subjected to BlackRock’s voting actions included ExxonMobil and Volvo.

But these recent developments are more than finger-wagging and checking the “no” box on proxy statements, BlackRock insists. The investment house claims it has engaged “hundreds” of companies on ESG (environmental, social and governance) challenges over the past several years. And it’s not just the usual suspects, as in polluting industries, that have come under the watchful eye of BlackRock.

“Our stewardship also includes topics that have been central to many companies’ license to operate, particularly over the past few months, such as human capital management and diversity and inclusion,” the company's report reads.

The current global pandemic, along with the ongoing protests seeking racial equality and criminal justice reform, are also on BlackRock’s radar.

“The COVID-19 crisis, and more recently the protests surrounding racial injustice in the United States and elsewhere, have underscored the importance of these issues and a company’s commitment to serving all of its stakeholders,” added the authors of the BlackRock report.

BlackRock has attracted its share of criticism, including its decision to not vote to support climate change-related resolutions presented to various companies, including Australian energy firms. At the same time, the investment giant said it had supported similar proposals on the proxy statements of companies like ExxonMobil and Chevron.

In addition, BlackRock has been public about its stance against companies like Tyson Foods, the management of which it voted against in the wake of supply chain problems and outbreaks of COVID-19 at some of its plants. BlackRock also voted against a director on the board of McKesson Corporation over what it said were its actions during the U.S. opioid crisis.

The markets appear aligned with BlackRock’s directives, as investments in ESG funds keep increasing and perform better overall than standard indexed funds.

Don’t expect BlackRock and Fink to moderate their tone any time soon. As its executive committee recently wrote, “Given the groundwork we have already laid and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management when companies have not made sufficient progress.”

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