January 15, 2019 / In-depth

Activists target BlackRock with co-ordinated campaign

By Joe McGrath, ESG Clarity

The world's largest asset manager is being urged to change its voting behaviour at investee company annual general meetings

Activists target BlackRock with co-ordinated campaign

Activist shareholder group Follow This has joined several fund firms in urging BlackRock’s chief executive officer to adopt a more aggressive stance to tackle climate change in his annual address to company directors.

Follow This, the pro-environment shareholder group for investors in oil companies, had already clashed with the world’s largest asset manager last year when BlackRock voted against its climate resolution at oil giant Shell’s annual general meeting. The Follow This resolution had sought to formally secure Shell’s commitment to the Paris Climate Agreement.

On Tuesday, Mark van Baal, the founder of Follow This, published an open letter, asking BlackRock CEO Larry Fink to back a greater number of climate-related shareholder resolutions at the annual general meetings of companies in which it invests.

“The biggest threat to institutional investors’ clients’ assets is climate change,” van Baal said.

“More and more institutional investors want companies to commit to Paris, because they foresee that they cannot make a decent return on their capital in a world economy disrupted by devastating climate change.”

Van Baal’s public letter comes just a day after a similar appeal from a collation of fund groups including Trillium Asset Management, Boston Common Asset Management and the Ethos Fund.

“BlackRock has the opportunity to push for climate solutions that will benefit its customers, portfolios, and the economy upon which they depend,” Jonas Kron, senior vice president at Trillium, said in a press released statement.

“As many states, most major governments, and a growing number of private sector leaders move to support the Paris Climate Agreement, BlackRock cannot afford to be a laggard.”

Mr Van Baal’s letter notes that BlackRock – which had more than $6.3 trillion in assets as of March 2018 – had voted against the management teams of its investee companies in 5% of miscellaneous shareholder resolutions in the first half of 2018, according to BlackRock’s voting report.  The miscellaneous categories included climate resolutions, he said.

Despite the statistics, BlackRock said that climate risk was one of its engagement priorities in 2018. In the BlackRock Investment Stewardship report of March 2018, it warned that engagement on tricky themes “may require several meetings over a number of months” which means that the business has to maintain its focus “for at least two years.”

In last year’s report, the fund group said that it expects directors of companies in sectors exposed to climate risk to have “demonstrable fluency in how climate risk affects the business.” In instances where the fund group’s engagement has not resulted in the desired outcome, it said that it may use its vote at AGMs, although it would likely focus on opposing the re-election of directors responsible.

“Where we have concerns that the board is not dealing with a material risk appropriately, as with any other governance issue, we may signal that concern through our vote, most likely by voting against the re-election of certain directors we deem most responsible for board process and risk oversight.”

Several non-governmental organisations (NGOs) have also joined the campaign group urging BlackRock to do more. James Thornton, chief executive officer of Client Earth, said the fund group has “legal obligations as a fiduciary” for its investors.

“If it does not take stronger action to protect investors from climate risk in 2019, it will be failing to fulfil those duties.”