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Leaders of liberal-leaning US pension funds and politicians are cautioning BlackRock and other major asset managers against reversing their commitment to environmental, social, and governance (ESG) causes. This comes after a significant decrease in support for shareholder proposals during annual meetings.
Brad Lander, the comptroller of New York City, has accused BlackRock, the world’s largest money manager, of yielding to a “misinformed and shortsighted war against ESG at the behest of special interests.”
Data released this week reveals that BlackRock supported only 7% of environmental and social-related proposals at company annual meetings from June of the previous year. The $9.4tn asset manager has faced criticism from US Republicans for being too “woke,” and CEO Larry Fink has discontinued the use of the term ESG due to its divisive nature.
BlackRock denies that the criticism influenced its voting record. However, there has been a general decline in investor support for shareholder proposals since a rule change in 2021 made it more challenging for companies to block their inclusion on proxy ballots. The decline at BlackRock, however, has been particularly sharp.
According to Institutional Shareholder Services data, the median support for environmental and social shareholder proposals has dropped to 15% this year, compared to 25% last year and 32% in 2021. In 2021, BlackRock supported 47% of such proposals, and the figure fell to 22% last year.
Illinois State Treasurer Michael Frerichs expressed concern over ensuring BlackRock’s commitment to managing risks responsibly and not letting political pressure influence their services. Tobias Read, the treasurer for the state of Oregon, emphasized the importance of recognizing the risks that ESG issues pose to their investments.
While some institutional investors make their voting decisions at shareholder meetings based on their own guidelines, many delegate the responsibility to asset managers like BlackRock, Vanguard, and State Street. These asset management giants collectively control the shares of 15 to 20% of many S&P 500 companies, giving them significant influence over proxy votes.
New York City Comptroller Brad Lander, responsible for approximately $250bn of investments across five pension funds, stated, “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.”
BlackRock has chosen not to comment on its relationships with clients like New York City. However, the money manager has stated that its proxy voting decisions are solely based on advancing the financial interests of its clients. It also offers clients the option to play a more active role in proxy voting through its Voting Choice initiative.
BlackRock has attributed the decline in its support for climate-related votes to the proliferation of inappropriate proposals. Amy Borrus, executive director of the Council of Institutional Investors, has suggested that many asset managers voted for fewer environmental shareholder proposals this year due to an abundance of granular or overly prescriptive proposals.
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