BlackRock CEO Larry Fink’s annual letters to investees and clients are hotly anticipated, including by shareholders seeking that the company use its proxy voting practices to be more supportive of climate change proposals. 

Fink’s 2020 open letter to corporate CEOs stated that “Climate risk is investment risk,” and “[g]iven the groundwork we have already laid engaging on disclosure, and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.” Because of this statement, along with BlackRock joining the investor initiative Climate Action 100+ and a commitment to continued engagement, Mercy Investment Services withdrew our 2020 resolution seeking a review of BlackRock’s climate proxy voting record. The resolution was one of a larger engagement strategy with asset managers coordinated by Boston Trust Walden, which included investors presenting similar resolutions to T. Rowe Price and Vanguard. 

Unfortunately, shareholders concerned with BlackRock’s voting practices had reason to remain skeptical in 2020. According to Morningstar, BlackRock only supported 14 percent of the climate-related resolutions it voted on in the 2020 proxy season – less than the previous year’s level of support. In this timeframe, BlackRock’s peers, State Street and Fidelity, supported 55 percent and 47 percent of climate-related resolutions, respectively. 

Proponents considered BlackRock’s follow-through with the 2020 letter to be lackluster and refiled the proposal this year. Since refiling, BlackRock has instituted several important changes: Fink’s 2021 letter called for companies to create goals of being compatible with net-zero greenhouse gas emissions by 2050 and repeated the warning that voting against management and board directors would be potential consequences for non-responsive companies. In addition, BlackRock recently released its 2021 Stewardship Expectations document, which seemed to draw a distinction between the first half of 2020’s voting practices and the second half’s by demonstrating that BlackRock had supported more than 80 percent of environmental shareholder proposals after July 1, 2020, a “new approach.” 

Within the Stewardship Expectations document, BlackRock discussed its analysis of highly supported environmental and social shareholder proposals (greater than 30 percent support) and found that these resolutions tend to prompt more meaningful corporate response. The company also expanded its list of “focus companies” as engagement priorities from 440 companies to 1,000, thereby committing to engage the companies that generate 90 percent of the Scope 1 and 2 emissions in its portfolio.

Proponents have engaged BlackRock since these changes to gain deeper understanding of how they will be implemented, with the knowledge that urgent shorter- and mid-term climate actions must quickly become BlackRock’s call to its invested companies. Shareholders, clients, and all stakeholders recognize that BlackRock’s consistency in word and deed to the low-carbon economy transition we must see.

Katie McCloskey
Vice President of Social Responsibility, Mercy Investment Services