BlackRock emphasises climate and natural capital in majority of engagements

Climate change

The world’s largest asset manager, BlackRock, is highlighting climate and natural capital themes in more than half of its engagements with companies, as investors are urged to use their influence to push for positive change.

Climate change and the environment have risen up asset managers’ agendas while inflows to ESG funds have continued to increase. Sustainable funds reached USD35 trillion assets under management by the end of 2020.

According to a recent report from BlackRock Investment Stewardship (BIS), the asset manager engaged with 520 companies in the third quarter of 2021, covering a fifth of its client equity assets.

Environmental issues came to the fore in 58 per cent of its engagements in the period from 1 July to 30 September, while social issues were brought up in 38 per cent of discussions. Governance continued to dominate these conversations, being raised in over 90 per cent of the time.

BlackRock’s stewardship arm said it is “encouraged by the fact that more and more companies are enhancing their risk management processes to better identify and manage material environmental, social, and governance risks and opportunities”.

BIS cited multiple engagements with Brazilian drinks company Ambev over 2021, which included discussion of its natural capital risks related to its water use. 

Engagement from shareholders including BlackRock led to Ambev committing to improve its natural capital disclosures, as well as to work towards updated net zero commitment and recycling opportunities.

“Our engagement with companies often spans multiple months and even years,” writes BlackRock.“In Q42021, we will continue to engage on these material issues and monitor companies’ progress in the pursuit of sustainable long-term value creation.”

Concerns about governance or sustainability also led to BlackRock voting against the re-election of 800 directors globally, due to issues with director independence, board diversity, and executive pay. 

Asset managers are starting to evolve their voting policies, under pressure from both investors and governments to use their influence to help improve companies’ environmental, social, and governance practices.

An analysis by Insightia found that five of the world’s largest asset managers, BlackRock, Vanguard, State Street, Fidelity, and JPMorgan, increased their support for shareholder proposals on environmental topics by 13 per cent in 2021’s proxy voting season.

BlackRock, which has USD9.5 trillion in assets under management, has also announced plans to give institutional clients a say in voting decisions from 2022.

From 1 January 2022, BlackRock will be extending voting choice options to institutional clients in the US and UK that are invested in its index strategies. 

“This capability responds to a growing interest in investment stewardship from clients,” writes the asset manager. “It also reflects broader industry dynamics, such as the impact of advancing technology on investing.” 

A recent government taskforce recommended that trustees of UK pension schemes be given the right to express their voting preferences over their investments with external fund managers.

BlackRock says clients will be able to vote their shares according to their own policies using their own infrastructure, or direct votes on individual resolutions or companies of their choice, or continue to use BIS to vote proxies.

Approximately 40 per cent of the USD4.8 trillion index equity assets BlackRock manages for clients will be eligible for this new capability. 

“BlackRock is committed to exploring all options to expand proxy voting choice to even more investors,” writes the asset manager.

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Madeleine Taylor
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