BlackRock relaxes backing for ESG shareholder proposals.
BlackRock Backs Away from Supporting Shareholder Proposals on ESG
BlackRock, the world’s largest money manager, is shifting its stance on shareholder proposals that focus on environmental and social themes. This move suggests that the Republican pressure campaign against ESG regulations may be gaining traction.
In its annual report, BlackRock revealed that it supported only 7% of nearly 400 shareholder proposals related to environmental and social matters. This marks a significant decline from previous years, where the firm backed nearly a quarter and 47% of such proposals in the previous cycles.
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The report emphasized BlackRock’s commitment to maximizing shareholder value, addressing criticisms that the firm has strayed from its fiduciary duty by embracing ESG. According to the report, many proposals were deemed over-reaching, lacking economic merit, or redundant, making them unlikely to promote long-term shareholder value.
BlackRock acknowledges that measuring stewardship solely based on votes for or against proposals oversimplifies the complex considerations involved in voting decisions. The company believes that proxy votes cannot fully reflect the multitude of factors taken into account, including company disclosures and engagements with company leadership.
Conservative media figures have targeted BlackRock as a symbol of the ESG movement, given its massive size. Recently, Republican financial officers from 15 states sent a letter to the firm, questioning BlackRock’s efforts to address climate change and integrate ESG standards. They demanded answers regarding any potential conflicts of interest.
Furthermore, BlackRock’s ties to China have come under bipartisan federal scrutiny. The House Select Committee on the Chinese Communist Party announced an investigation into BlackRock and index provider MSCI.
In response to the backlash against ESG investing, BlackRock executives highlighted a pilot program in an op-ed in the Wall Street Journal. The program allows individual investors to decide how their share of BlackRock’s largest exchange-traded fund will vote on the companies they own.
Notably, BlackRock CEO Larry Fink’s annual letter this year did not mention ESG and downplayed discussions about the climate. Fink stated that companies are not “the environmental police,” signaling a shift in tone as GOP pushback intensifies.
“When I write these investment letters, it was never meant to be a political statement. They were written to identify long-term issues to our long-term investors,” Fink clarified in the letter.
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