Proposals on environmental and social issues received a sharp drop in BlackRock’s support, with the world’s largest asset manager cutting its backing to just 4.1 percent in the latest AGM season, down sharply from a year earlier. This marks one of the major shifts in how the firm has approached ESG topics.
A new report from the investment management firm, entitled “2024 Global Voting Spotlight,” said that even while the volume of proposals related to environmental and social issues increased from 455 to 493 over the past years, BlackRock’s support for these kinds of proposals has been on a decline. It supported 6.7 percent of such proposals in 2023, compared with 47 percent it did for 2020-21. Interestingly enough, support for such proposals went down even as the number of resolutions on this topic increased.
BlackRock eases support amid mounting criticism, notably from U.S. According to Republican politicians, companies are engaging in “woke capitalism.” Based on the report, most of the proposals BlackRock rejected were far-reaching and extremely unlikely to be meaningful in terms of advancing long-term shareholder value, with little or no economic merit. Additionally, a good number of turned down proposals were considered to deal with the business risks that the companies had already put in place mechanisms to handle, thus rendering the proposals irrelevant.
A strategy has been ripening inside BlackRock with respect to ESG issues, focusing first and foremost on the financial resilience of this transition to a low-carbon economy. As BlackRock gears up for the AGM season, setting an even higher bar for its board in demonstrating resilient financial sustainability, it recognizes that any competitive edge for business in the future depends on the pace at which companies navigate environmental constraints to the benefit of all.
Even so, while BlackRock has slackened its voting policy regarding proposals associated with environmental and social concerns, the firm’s record of support for such shareholder resolutions has, in fact, been on the rise. During the first half of 2021, BlackRock voted in support of 20 resolutions across concerns like board diversity and climate change; a full one-fifth of these related to climate and natural capital concerns, targeted at companies including Berkshire Hathaway, Denny’s Corporation, Jack in the Box and Wingstop. This reflects the wider trend whereby BlackRock-backed shareholder resolutions rose to 11% from 9% a year ago. Much of the increase was attributed to those related to governance resolutions.
Industry experts have had to comment that, although support for environmental and social proposals has only slightly dropped, this is important because the number of resolutions seeking sustainability measures is increasing. As stated by Lindsey Stewart, Morningstar Sustainalytics’ director of investment stewardship research, the drop in supported proposals translates to 10 fewer E&S proposals this year compared to the last, when there was an increase in the total number of resolutions.
A key contributing factor in the decline in support was that there were more resolutions than ever trying to roll back corporate sustainability policies, including very tangible requests for companies to bring their portfolios in line with global climate goals, all of which had no support from BlackRock. Message clearly emerged that persistent sustainability was the pivot upon which companies should form strategy.
In summary, BlackRock’s latest voting season underlined a strategic step toward a more selective approach in supporting environmental and social proposals. Firm support for proposals hit a new low, while the overall vote in favor of shareholder resolutions advanced and remained focused on governance issues. This was illustrative of BlackRock’s strategy to square financial performance with sustainability in the face of market and regulatory pressures and the struggle to deliver long-term value to shareholders.