BlackRock is stepping up its efforts to pressure corporate boards on climate change by joining an influential investor group, after the world’s largest fund manager was accused of failing to match rhetoric with action.
On Thursday the New York-based firm signed up to the Climate Action 100+ initiative, a group of 370 fund managers and asset owners representing $35tn that is urging some of the heaviest emitters of greenhouse gases to reduce their environmental impact.
BlackRock manages $7tn in assets, making it among the biggest shareholders of most of the world’s listed businesses. The firm has typically opted to work directly with companies through its internal “stewardship” team rather than use the clout of its voting power.
That stance has exposed it to criticism, including from former US vice-president Al Gore and Christopher Hohn of hedge fund TCI, who said last month that “major asset managers such as BlackRock have been shown to be full of greenwash”.
Ceres, a sustainability non-profit, last year ranked BlackRock 43rd among 48 asset managers, having found that it backed a very low percentage of climate-related proposals from shareholders.
Some of BlackRock’s biggest clients have also increased their focus on stewardship when hiring asset managers. Japan’s Government Pension Investment Fund, the world’s largest pension fund, last year reduced a big passive mandate that had been awarded to BlackRock. Hiro Mizuno, GPIF’s chief investment officer, told the FT last month that “the main battlefield among our passive managers is going to be in the stewardship area”.
Climate Action 100+ requires its signatories to press companies in their portfolios to reduce greenhouse gas emissions in line with the goals of the Paris Agreement, outline the board’s accountability on climate risk and disclose financial risks related to climate change.
BlackRock has voted against shareholder proposals brought about by Climate Action 100+ in the past and is under no obligation to vote for them in the future, even after joining the group. However, the company said it was “accelerating our engagement with companies on this critical issue” and that becoming a signatory was an extension of its stewardship efforts.
“This acknowledges that climate change is a systemic risk that needs to be followed by action,” said Anne Simpson, director of global governance for the California Public Employees’ Retirement System, another signatory to the initiative. “There is nowhere to hide from the impact of climate change and we have to target the source, which means getting emissions down.”
BlackRock’s admission into the group comes ahead of the annual letter to chief executives from Larry Fink, the fund manager’s chief executive. Previous letters have called upon corporate leaders to act with purpose, with respect to climate change. In 2017, he signalled that BlackRock would “not hesitate to exercise our right to vote against incumbent directors or misaligned executive compensation” for companies failing to show progress.
“The more the owners of these large emitters change, the more likely they will make efforts to reduce greenhouse gases,” said Mindy Lubber, president of Ceres. “That’s why is an important change.”