The world’s largest asset manager is showing it is more willing to use its heft to influence the policies of the companies it invests in.
BlackRock BLK 1.35% has so far increased its support for shareholder-led environmental, social and governance proposals, and published a slew of criticisms of public companies that haven’t bent to its overall requests.
The firm votes on behalf of the investors in its many funds. For the roughly 170 ESG shareholder proposals it voted on during the first half of the proxy year, BlackRock backed 91% of environmental proposals, 23% of social proposals and 26% of corporate-governance proposals.
That included voting for a proposal to make it easier for shareholders to push for changes at Tesla Inc. and another to make Spanish airport operator Aena SME SA publish carbon-emission reduction plans. Most of the votes for the proxy year come in the six months ending in June.
For the 1,000-plus proposals for the year ended in June 2020, BlackRock backed 6% of environmental proposals, 7% of social proposals and 17% of governance proposals.
“BlackRock has strongly signaled that quiet diplomacy is not the only tool in its toolbox,” said Rich Fields, a partner at law firm King & Spalding who focuses on corporate-governance issues. “We expect more votes for shareholder proposals and against directors in this and future years.”
The money manager has been previously attacked for being all talk and no action on its loud calls for companies to focus on ESG issues. Whether the firm overseeing $9 trillion in assets will wield votes it controls for investors more aggressively for the rest of the shareholder voting year remains to be seen.
BlackRock’s initiatives are part of a broader push by Wall Street—institutional investors, money managers and banks—to wield influence through their investments.
The firm is one of the top three shareholders of more than 80% of the companies in the S&P 500, according to S&P Global Market Intelligence, through its many funds. The money manager casts a long shadow on shareholder meetings where it can vote on behalf of its investors on board directors, executives’ pay packages and other company matters.
BlackRock has traditionally deferred to the companies’ management for the bulk of votes. On votes involving the makeup of boards, BlackRock voted against company recommendations 8% of the time during the year ended in June 2020.
The firm’s new stewardship head, Sandy Boss, said BlackRock made changes over the past year to ensure its votes were in line with its investment priorities.
“We are going through a period of change to align our investment convictions with the firm’s message,” she said.
Each year, Chief Executive Larry Fink writes a letter to CEOs that says companies shouldn’t cater solely to shareholders but be attentive to customers, workers and local communities to sustain returns.
Mr. Fink said in 2020 that BlackRock would be “increasingly disposed” to vote against companies that weren’t reporting climate and other risks in BlackRock-endorsed formats or demonstrating clear plans to address them.
The Securities and Exchange Commission warned this year that it would pay closer attention to whether fund managers are voting as they say they would. A group of Democratic senators complained in late 2020 that BlackRock’s voting record was “troubling and inconsistent” with its pledge to push companies to manage climate risks.
BlackRock’s 60-person stewardship team develops guidelines for how companies should handle issues it says protect returns for clients for the long term—such as making certain boards are diverse and companies are prepared to reduce carbon emissions.
Talking to companies will remain the primary way BlackRock conveys its expectations to companies, a spokesman said.
In a sign it is taking a more aggressive voting stance, the firm voted against—or withheld votes from—proposals to re-elect individual directors 5,450 times in 2020, more than ever before.
In April, BlackRock said it voted against a board director of Australian oil and natural-gas producer Woodside Petroleum Ltd. due to the company not outlining targets for certain emissions generated when customers use its products. A Woodside spokeswoman declined to comment.
BlackRock said carbon-intensive companies should set goals to limit this specific category of emissions, which companies can’t control in the same way as those generated by their own operations.
Some executives worry they could face lawsuits from publicizing details on labor or climate plans in areas where global disclosure standards don’t yet exist.
Others have complained BlackRock’s recent votes have come without warning or a proper rationale, said Ali Saribas, a partner at shareholder advisory firm SquareWell Partners.
“BlackRock’s approach will fuel a rising frustration among companies that believe BlackRock’s stewardship team will most likely apply a tick-the-box approach given the sheer volume of companies they passively own,” he said.
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Ms. Boss, the BlackRock stewardship head, said, “It’s important what we do is predictable, consistent and also well-signaled in our policies.”
A spokesman for BlackRock said the firm made clear to companies last year that it would be more active on climate voting, and has been speaking with large companies about climate risks for at least three years. Regardless of how it votes in any one year, BlackRock seeks to support companies over decades, not just years, he said.
Since 2020, BlackRock has stepped up pressure on more companies by publishing criticism with online bulletins about key votes.
The firm has stayed away from the activist-investor playbook of seeking board seats—and has avoided intervening on a company’s day-to-day management.
“It would be very hard for a passive fund manager to support a shareholder proposal that addresses systemic risks but wades too far into dictating strategy,” said Jessica Strine, CEO at advisory firm Sustainable Governance Partners.
In some cases, the firm’s prominent clients haven’t been shy about warning BlackRock’s top boss away from weighing in on political matters.
After the money manager joined others in signing a statement opposing a Texas bill regulating transgender access to public bathrooms in 2017, Britt Harris, then-investment chief at Teacher Retirement System of Texas wanted a word with Mr. Fink.
Mr. Harris, who now leads the University of Texas/Texas A&M Investment Management Co., told Mr. Fink that he respected the CEO’s personal views. But he didn’t want BlackRock telling Texas what to do, according to people familiar with the men’s exchanges.
As a reminder, he gave Mr. Fink Texas-themed cuff links.
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