BlackRock and Vanguard’s Climate Credibility Under Fire?

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    Stockholm (NordSIP) – In a new report from Majority Action, a non-profit, non-partisan organisation focusing on holding corporations accountable for their investments, BlackRock and Vanguard came under criticism for their lack of shareholder action on climate change in 2020.

    According to the report, “BlackRock and Vanguard, the world’s largest asset managers and among the top three shareholders in the vast majority of S&P 500 companies, continued to undermine global investor efforts to promote responsible corporate climate action—despite their public commitments to hold corporate directors accountable in the 2020 proxy season”.

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    Majority Action noted that the two asset manages voted for 99% of US company-proposed directors across the energy, utility, banking, and automotive sectors. The report argued that BlackRock and Vanguard “were just as likely to support management at utilities that had not made a net-zero commitment”.

    The votes come just months after CEO Larry Fink declared that BlackRock would put climate change at the centre of its investment strategy. Although the report focused on the actions and inaction of the two largest global asset owners, Fidelity also ranked poorly according to similar metrics.

    The report was keen to acknowledge BlackRock’s claims that it had voted against directors at companies for climate reasons across its holdings. “However, only three were energy or utility companies in the S&P 500. BlackRock cast almost all these dissenting votes at either non-U.S. or smaller U.S.-based companies,” the report explained. “Until BlackRock holds the largest emitters in fossil-fuel intensive sectors accountable, it will fail to mitigate the portfolio-wide systemic risk that climate change poses”.

    Climate-Critical Resolutions

    However, the criticism did not stop at what the asset managers support. Perhaps more problematic, opposed “climate-critical resolutions”. BlackRock supported just three of the 36 proposals. Despite joining Climate Action 100+ in early 2020, of the 12 proposals highlighted by the coalition, BlackRock only supported two. Vanguard only endorsed four of the 36 proposals.

    According to Majority Action further elaborates that “at least 15 of these critical climate votes would have received majority support of voting shareholders if these two largest asset managers had voted in favour of them”.

    “These included proposals that would have held JPMorgan Chase’s board accountable for its role as the world’s largest fossil fuel financier and bring much-needed transparency to the lobbying efforts of Duke Energy, one of the largest and highest-emitting electric utilities in the US,” the report explains.

    On the other hand, Legal & General Investment Management and PIMCO showed the lowest support for directors at these 56 companies. Legal & General voted in favour of 85% of company-backed directors at utilities, only 75% of directors at oil and gas companies, and 88% at banks and automotive manufacturers, while PIMCO voted for 72% of company-backed directors at utilities, 81% at oil and gas companies, 89% at banks, and 88% at the automotive manufacturers.

    The Broader Context

    When confronted with the findings of the report, BlackRock was keen to contextualise the findings within its broader voting and engagement records. “Climate risk is investment risk. As a crucial component of our fiduciary duty to our clients, we engage with companies to ensure they are effectively addressing this and other ESG risks,” a BlackRock spokesperson told NordSIP.

    “The Majority Action report focuses on 36 shareholder resolutions in the US. We took voting action at 53 companies for climate issues, more than the 41 companies which received a pure climate-related shareholder proposal. We engaged over 400 companies that face material financial risks in the transition to a low-carbon economy, and in voting against 55 directors and putting 191 companies on watch, we leveraged the widest range of stewardship tools in addressing climate risk on behalf of our clients.”

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