BlackRock Reduces Voting Against Companies on ESG Issues

According to its newly released 2022 Voting Spotlight report, investment giant BlackRock supported fewer environmental, social, and climate-related initiatives and decreased the number of climate-focused corporate engagements during the 2022 proxy voting season.

The report indicated that BlackRock’s support for shareholder resolutions on environmental and social (E&S) matters decreased as the quality of the proposals declined, and companies made significant progress on climate-related strategy and disclosure.

In the run-up to this year’s proxy season, BlackRock noted a trend towards an increase in ESG-focused proposals of “varying quality,” following revised SEC guidance on shareholder proposals broadening the scope of permissible proposals.

In the new report, BlackRock said that E&S proposals increased by 133% in the U.S., with many of the resolutions “unduly constraining on management” or “overly prescriptive,” or even failing to recognize that the companies had already largely met the goals of the proposals. BlackRock said that it supported 22% of E&S shareholder proposals this year, substantially below last year’s 47%.

BlackRock noted that overall market support for E&S shareholder proposals has declined as well, with proposals voted at U.S. companies attracting only 27% this year, down from 36% last year.

According to the new report, BlackRock voted to signal concern about climate action or disclosure at 234 companies, compared to 321 companies last year and did not support the election of 176 directors for climate-related concerns, compared to 254 the prior year.

While BlackRock noted a decline in shareholder proposal quality, it also indicated improvements in company performance and transparency on ESG issues, driving increased support overall for management. In the report, BlackRock said:

“We have been encouraged by the progress many companies in key sectors have made in their energy transition planning and actions, as detailed in their enhanced disclosures… We have also seen enhanced disclosure by many companies on how they are engaging in policies addressing climate risk and the energy transition, through their corporate political activities and those of the trade associations of which they are active members.”

BlackRock also said that it was more supportive overall of management in the Americas and EMEA, noting “substantial improvements” in board diversity in the Americas, remuneration policies and disclosures better aligned with long-term shareholder returns in EMEA, and improved climate action plans and disclosures in both regions.

Over the past year, BlackRock slightly increased its engagement activity, reaching 3,690 engagements compared to 3,650 last year. While engagements on key priority areas including Board Quality and Effectiveness (2,330 engagements, compared to 2,150 last year), and Incentives Aligned with Value Creation (1,350 vs 1,240) increased the most, fewer engagements were conducted on Climate and Natural Capital (2,060 vs 2,200 last year) and Company Impacts on People (1,280 vs 1,350).

Source: Financial Times

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