BlackRock's ESG Support Declines: What It Means for Investors and Future Market Trends
By Simon Jessop
LONDON (Multibagger) - BlackRock (NYSE:), the world’s largest asset manager, has significantly reduced its backing for shareholder proposals related to environmental and social issues during the most recent annual general meeting (AGM) season, supporting just 4% of such proposals, according to a detailed report on its global voting record.
Despite an increase in the number of environmental and social proposals from 455 to 493 year-on-year, BlackRock stated that most were rejected for reasons similar to those in previous years. In 2023, BlackRock supported 6.7% of such proposals.
"In our assessment, the majority of these proposals were over-reaching, lacked economic merit, or sought outcomes that were unlikely to promote long-term shareholder value," the report stated. "A significant percentage were focused on business risks that companies already had processes in place to address, making them redundant."
BlackRock had indicated earlier that it would emphasize financial resilience to corporate boards in this season.
Additionally, the rise in resolutions aimed at compelling companies to reduce their sustainability risk management plans, including alignment with global climate goals, contributed to the lower support. BlackRock did not support any of the 88 proposals falling into this category.
This year, BlackRock supported 20 proposals, four of which were related to climate and natural capital, specifically around disclosures at Berkshire Hathaway (NYSE:), Denny’s (NASDAQ:), Jack in the Box (NASDAQ:), and Wingstop (NASDAQ:).
More broadly, BlackRock’s overall support for shareholder resolutions increased to 11% from 9% - backing 99 out of 867 proposals compared to 71 out of 811 the previous year. This increase was largely driven by support for governance-related resolutions.
"The proposals we supported sought to enhance minority shareholders' rights, for example, by introducing simple majority voting. Market support for governance proposals also increased relative to last year," BlackRock said.
Across the market, overall support for ESG proposals remained flat at 23%, according to industry tracker Morningstar. However, support for environmental and social resolutions dropped from 19% to 16%.
Beyond shareholder resolutions, BlackRock voted on more than 169,200 proposals globally, backing management’s position 88% of the time, consistent with previous years. It also supported the election of board directors 90% of the time, but declined to support 128 proposals at 104 companies due to concerns about inadequate disclosure or ineffective board oversight of climate-related risks.
Analysis: How This Affects You and Your Finances
Breaking It Down:
- BlackRock's Stance: BlackRock, a major player in the finance world, has cut back on supporting climate and social issues, backing only 4% of related proposals.
- Reasoning: They believe many proposals were redundant or lacked economic merit, meaning they wouldn't add long-term value.
- Market Impact: This reflects a cautious approach towards ESG (Environmental, Social, and Governance) investments, which could influence overall market trends and investor behavior.
- Your Finances: If you’re investing in ESG funds, be aware that large asset managers like BlackRock might not support all environmental and social initiatives, potentially affecting the performance and direction of these funds.
- Future Trends: Watch for shifts in how big firms like BlackRock vote on these issues, as it can signal broader market changes and priorities.
Understanding this helps you make informed decisions about where to invest your money and how global investment strategies might evolve.