BlackRock’s Time Has Come on Climate
Many of our Medium posts thus far have focused on BlackRock, the largest investment manager in the world. BlackRock has its own shareholder meeting today, and is facing a growing wave of anger and accountability for its myriad failures on climate change. Investors attending the meeting will be challenging BlackRock’s leadership for their recalcitrance when it comes to using its immense power responsibly.
Here’s why: BlackRock is a powerful force in the US economy, even though many people have never heard of the company. With over $6 trillion in assets, BlackRock manages investments for pension funds, universities, college savings plans, and its own mutual funds and other products. As a result, BlackRock is typically the largest or second largest shareholder at just about every significant publicly traded company in the US, and those holdings mean they have tremendous power over the boards of directors of those companies. Millions of Americans are counting on BlackRock to manage their savings and investments in line with their long-term goals, and to allocate their investments and use our shareholder voting power in our long-term best interests.
Unfortunately, the coming damage and dangers of runaway climate change threaten to undermine every long-term investment objective. And to be sure — BlackRock talks a great game on climate, saying just a month ago that “climate change is a risk investors can’t ignore.” However, BlackRock’s words are meaningless unless it uses its power to demand that the energy and utility companies driving our climate crisis commit to transitioning to a fully decarbonized economy — and back up their demand with their voting power.
As our research has shown, every year BlackRock ranks at the bottom of the largest fund managers when it comes to using their voting power to force climate responsibility at short sighted energy and utility companies that would far rather maintain the status quo. In 2018, for example, BlackRock supported 99% of management-nominated directors at US fossil fuel companies while voting for just 10% of key climate shareholder resolutions.
To make matters, worse, BlackRock’s outsized power means it effectively wields a “swing vote” on important shareholder resolutions, which it routinely uses to block critical resolutions demanding climate responsibility. For example, BlackRock’s votes alone blocked TEN 2 degree scenario resolutions from passing in 2017 (see chart below). Doing so meant letting these companies off the hook from grappling with the immense risks that climate change poses to their investors, their business models, and the planet.
Source: Asset Managers and Climate-Related Shareholder Proposals: Report on Key Climate Votes (50/50 Climate Project, March 2018)
BlackRock has consistently referred to access, dialogue, and engagement, not voting, as key strategies for dealing with companies most responsible for driving the climate crisis. Yet it is plainly obvious that private dialogue is not yielding results nearly as fast and as ambitious as is needed to match the urgency of the climate crisis and protect long-term value for investors.
The time for engagement without meaningful progress and action must come to an end.
But despite BlackRock’s pro-climate rhetoric, the company still continues to fail to use its voting power responsibly.
For example, at Duke Energy’s 2019 shareholder meeting, BlackRock refused to hold the board accountable despite the company’s pattern of undermining responsible climate policy and failing to set any long term decarbonization target. To make matters worse, BlackRock voted to re-elect an outright climate denier to the company’s board to a position where he oversees Duke’s sustainability and political activities.
That’s why investors and activists are demanding answers at BlackRock’s shareholder meeting today from chairman and CEO Larry Fink. As the world’s biggest investor and top owner of fossil fuels on the planet, BlackRock itself is a member of trade associations that have opposed meaningful climate legislation or sought to undermine shareholder rights, such as the Chamber of Commerce and the Business Roundtable. Shareholders have filed a resolution calling on BlackRock to improve its lobbying disclosures, and many will be calling on Larry Fink to explain how BlackRock’s actions could possibly be defended in light of the damage climate change will bring to the planet and long-term portfolios.
The real test will come at next week’s at ExxonMobil shareholder meeting, where BlackRock is both a top shareholder and also manages ExxonMobil’s own pension plan. Majority Action has joined the Church of England and New York State Comptroller Thomas DiNapoli in their call to vote against the entirety of the ExxonMobil board of directors for its failure to engage responsibly on climate change, and to back resolutions demanding that the company fully disclose its political and lobbying activity end ensure board independence from management. As a top shareholder, BlackRock may very well again be the swing vote on these issues. Will they hold ExxonMobil’s board accountable?
