Examining BlackRock’s shift away from ESG (2023)
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The financial and mainstream media were abuzz last week with news that BlackRock’s support for ESG shareholder propositions dropped during the last shareholder meeting season. Long considered the single most aggressive advocate of ESG investing, BlackRock has recently been retreating from the limelight on the issue, and story, after story, after story noted as much last week. Barron’s put it this way:
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BlackRock ’s support for shareholder proposals focused on environmental and social issues plummeted for a second consecutive year, even as the number of proposals soared. The world’s largest asset manager said it supported 26 out of 399, or 7%, of proposals focused on environmental and social considerations. That is down sharply from a year ago, when BlackRock supported 22% of 321 of such measures, and 47% of 172 the year before. In a report released Wednesday, BlackRock’s investment stewardship team said too many proposals were “overreaching, lacking economic merit, or simply redundant.” Shareholders submitted a record number of proposals in the 2022-23 proxy year, the firm said. Joud Abdel Majeid, global head of stewardship at BlackRock, said in the forward to the report that while there was a 34% increase in shareholder proposals focused on environmental and social issues, more of them were “overly prescriptive” or “lacking economic merit.” … Over the past year, the pushback against environmental, social, and governance investing has escalated, putting BlackRock, which had been seen as a supporter of ESG, into the hot seat. In June, Larry Fink, BlackRock’s CEO, said he had stopped using the term because it had become too politicized. … BlackRock’s waning support for proposals on environmental and social issues comes amid this backlash and a general decline in support for ESG shareholder resolutions. But the drop-off can’t all be blamed on the culture war over so-called corporate wokeism. Lindsey Stewart, director of investment stewardship research at Morningstar, said that while there are frequent suggestions that anti-ESG rhetoric in the U.S. is depressing the level of support for such resolutions, that isn’t the main reason for the decline. “I think those suggestions give the anti-ESG crowd far too much credit,” Stewart added. “If institutional shareholders’ proxy votes were starting to tilt in an anti-ESG direction, then anti-ESG proposals would probably have been better supported this year compared with 2022. The opposite is true. Support for both pro- and anti-ESG proposals has decreased this year.[1] |
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Some ESG advocates were upset about BlackRock’s changing approach, according to ZeroHedge.com:
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Having already been hit by backlash from red-state officials over its embrace of the environmental, social and governance (ESG) agenda, BlackRock is now under criticism from Democratic officials alarmed that the giant asset manager has decreased its votes in favor of ESG shareholder proposals. Last week, the Financial Times reported that BlackRock voted for only 26 ESG proposals in the 12-month period ending in June -- or 7% of the total opportunities. That marks the continuation of a steep decline that's seen BlackRock's percent of "yes" votes on such proposals plummet from 47% in 2021. That trend has angered leftists, including New York City Comptroller Brad Lander. In a textbook example of projection, Lander tells FT that BlackRock has caved to a "misinformed and shortsighted war against ESG at the behest of special interests." “BlackRock has a responsibility to use its votes to send a clear and consistent message regarding the need to manage climate-related and human-capital related risks,” said Lander, who oversees $250 billion in pension assets. BlackRock's declining percentage of "yes" votes comes as the quantity of ESG proposals has surged thanks to new SEC rules that make it easier for shareholders to get them on the proxy ballots. On Wednesday, BlackRock said it's voting "no" more often “because so many shareholder proposals were overreaching, lacking economic merit, or simply redundant." Illinois State Treasurer Michael Frerichs is watching with unease, telling FT, “We understand that there are years where there are lower-quality proposals, but if this becomes a trend over multiple years, then we’ll be concerned." State Street's frequency of backing ESG measures has also declined, but not as sharply as BlackRock's.[1] |
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Matt Cole, the CEO of Strive Asset Management (the investment firm co-founded by presidential candidate Vivek Ramaswamy), agreed with Lindsey Steward that what the financial and mainstream media perceived as BlackRock’s decline in ESG support may not be a real and earnest move away from ESG. Cole stated that the issue is not quite as cut-and-dried as it seems on the surface. The real issue, he argued, hinges on support for stakeholderism vs. traditional shareholder capitalism. As long as BlackRock supports a stakeholder model, Cole continued, then its votes on shareholder proposals and its CEO’s retreat from using the term ESG are not meaningful actions.
See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
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