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'Less supportable': BlackRock holds back approval of US shareholder climate proposals

blackrock office building

American global investment management corporation BlackRock, Inc.'s San Francisco office exterior. Image via Shutterstock/Tada Images.

BlackRock's support for shareholder environmental and social proposals has fallen significantly in the U.S., with the world's largest asset manager voting in favor of less than a quarter of proposals over the past year, according to its latest proxy voting report.

Covering the annual meeting season through July, last month's report reveals BlackRock supported just 24 percent of environmental and social shareholder proposals at U.S. companies over the period, marking a major drop from the 43 percent it voted in favor of the previous year.

Given the number of sustainability-focused proposals put forward by shareholders at BlackRock-managed companies rose by 133 percent over the period, it means the number it backed fell from 81 proposals last proxy season to just 71 this year, the report reveals.

In the introduction to the report, Sandy Boss, global head of investment stewardship at the asset manager, claimed shareholder proposals had become "less supportable" in the 2021-22 proxy year due to a number of factors.

BlackRock said the decline suggested that 'most investors took a measured, materiality-based approach in their analysis and voting on proposals this proxy year.

Interventions proposed by shareholders had been more prescriptive than in prior years, she said, noting that many sought to "dictate the pace of companies' transition plans … with little regard to company financial performance." Other proposals, she noted, had failed to recognize that companies "had largely already met their ask."

"This proxy season underscored our belief that a constructive stewardship approach contributes to companies making meaningful progress in their climate-related planning and disclosures, where this is a material financial risk and/or opportunity for them," Boss wrote. "But it also reinforced our long-held view that that the pathway to decarbonization is difficult to predict and will not occur in a straight line. Consistent with that view, we have not supported certain climate shareholder proposals that are overly prescriptive or micro-manage how companies should decarbonize."

The report argues falling support for environmental and social proposals from shareholders last year was not unique to BlackRock, with support for such proposals at all U.S. public companies dropped from 36 percent to 27 percent over the proxy season.

BlackRock said the decline suggested that "most investors took a measured, materiality-based approach in their analysis and voting on proposals this proxy year."

When assessing shareholder proposals, we evaluate each proposal on its merit, with a singular focus on its implications for long-term value creation.

It cites examples of overly prescriptive proposals as those that called for decommissioning fossil fuel assets, the elimination of financing and insurance underwriting for fossil fuel projects, and cessation of fossil fuel exploration and development.

"When assessing shareholder proposals, we evaluate each proposal on its merit, with a singular focus on its implications for long-term value creation," the report states. "We consider the business and economic relevance of the issue raised, as well as its materiality and the urgency with which we believe it should be addressed."

BlackRock first warned several months ago that its 2022 climate-related shareholder proposals had become more prescriptive compared to the previous year, in the wake of new guidance from the U.S. Securities and Exchange Commission that broadened the scope of permissible proposals that address shareholder social policy issues. The note acknowledged there were "unique dynamics" at play during this year's season, arguing that Russia's invasion of Ukraine had made investments in companies that invest in both fossil fuel and renewable energy sources of energy more attractive.

It also claimed to have seen a growing trend whereby companies, particularly in Europe, were increasingly choosing to introduce management proposals on climate action plans and progress, alongside those introduced by shareholders. In these instances, Blackrock said it and other investors were "increasingly inclined to support the management proposal."

The firm's increasingly vocal stance on climate has faced criticism amid claims it is at odds with its actual investment activity.

BlackRock has become increasingly vocal about environmental sustainability in recent years, with CEO Larry Fink using his annual letter to shareholders and CEOs to make the economic case for the net zero transition, and also to tout the firm's latest coal exclusion policies, as well as other measures aimed at slashing emissions from the firm's giant asset portfolio.

But the firm's increasingly vocal stance on climate has faced criticism amid claims it is at odds with its actual investment activity, given BlackRock remains one of the world's largest investors in both fossil fuel companies and businesses linked to deforestation.

report published last year calculated that BlackRock holds $85 billion in coal companies, and in January 2021 the company completed a $15 billion deal with Saudi Aramco to acquire 49 percent of its gas pipeline subsidiary.

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