BlackRock Faces the Reality of Climate Activism

May 6, 2020 | 2:48 pm
Stephen Melkisethian/Flickr
Nicole Pinko
Former Contributor

BlackRock, the largest asset manager and largest investor in fossil fuels in the US, is wielding its voting power with thousands of publicly traded companies this spring and holding its own annual shareholders’ meeting on May 21. It’s been a big year for BlackRock, which joined the Climate Action 100+, an influential climate shareholder advocacy group, back in January just before Chair and CEO Larry Fink’s annual letter to CEO’s laid out climate-related financial risks as a key long-term concern for shareholders. The next few weeks will show everyone if BlackRock really means business when it comes to climate action – its vote could make or break climate-critical resolutions at ExxonMobil, Chevron, and JPMorgan Chase.

The evolution of BlackRock’s climate commitments

In 2019, the Yes Men published a fake Larry Fink letter promising climate-friendly policies, including divestment from fossil fuel companies.

At the beginning of every year, CEO Larry Fink flexes the muscle of BlackRock’s $7 trillion in assets under management by sending a letter to public company CEOs outlining his priorities and concerns for the coming year. In 2018, Fink’s letter made waves in the investor community by declaring that companies should focus on serving a social purpose. In 2019, Fink wrote that this purpose was more important than short-term profits (although a fantastic stunt by the Yes Men laid out a facetious, but much more ambitious plan for the company).

Fink’s 2020 letter called on companies to better measure and disclose their climate-related financial risks. The letter pressured companies to disclose sustainability issues in line with the Sustainability Accounting Standards Board (SASB) and Task-force on Climate-related Financial Disclosures (TCFD) recommendations. Fink also declared that BlackRock was ready and willing to “vote against management and board members when companies are not making sufficient progress” on sustainability disclosures or business practices, and that BlackRock would be “exiting investments that present a high sustainability-related risk.” This is the letter, and stance, that’s put us on pins and needles – everyone is watching to see if BlackRock follows through on these commitments.

BlackRock’s disappointing track record on climate

BlackRock has ample opportunity in the coming weeks to encourage progressive climate action – voting against JP Morgan Chase board member Lee Raymond (climate-denying former CEO of ExxonMobil), supporting climate action shareholder proposals at ExxonMobil and Chevron, and supporting shareholder proposals calling for transparency on political spending and lobbying. Or BlackRock could do none of those things, as has traditionally been the case, and leave shareholder activists disappointed yet again.

BlackRock’s sizable investment in fossil fuels – $87.3 billion as of October 2019 – makes it one of the three largest investors in fossil fuels, along with Vanguard and State Street. Perhaps in line with its historic investment strategy, the company has a lackluster voting record on climate proposals. Aside from its unexpected support for a 2017 resolution calling on ExxonMobil to report annually on what Paris-aligned climate policies would mean for its business, BlackRock has not backed many climate-related shareholder resolutions in recent years – in 2019 it supported only 15 percent of climate critical shareholder proposals it voted on. At least 16 of these climate critical resolutions—including three at ExxonMobil—would have received majority support if BlackRock and Vanguard had voted for them. In fact, the BlackRock supported management-backed proposals at fossil fuel companies more often than it did at US equities overall.

BlackRock, as a publicly-traded company owned by shareholders, is also facing a climate shareholder proposal this year.  Although three climate-related proposals were originally filed, the proposal to report on lobbying was withdrawn after the company made disclosure commitments, as was the proposal to report on ESG proxy voting.  The BlackRock board has unanimously recommended that shareholders oppose the remaining resolution, filed by As You Sow, asking the company to report on how it intends to fully implement its stakeholder-centric view that companies have a social purpose.  The board believes that BlackRock already operates in a fashion consistent with its principles.

Oversight of CARES Act stimulus funds

BlackRock’s climate commitments have also been in the news regarding the recent COVID-19 response and whether BlackRock will incorporate climate-related financial risks into its stimulus-backed bond investment decisions. The Federal Reserve, which acts as the central bank of the US, hired BlackRock to assist with part of the first CARES Act stimulus package. The asset manager will help manage the purchase of billions of dollars worth of bonds in an attempt to stabilize the corporate bond market, which has been upturned by the pandemic. Due to BlackRock’s sizable fossil fuel investments and the need for a rapid transition to a low-carbon economy, a group of US legislators and climate NGOs called for strict oversight of the funds and a commitment to building a resilient economy. In response, 17 Senate Republicans, most from fossil fuel-heavy states, are seeking to prohibit BlackRock from considering climate-related financial risks in administering bailout funds.  This is a short-sighted approach given the obvious climate-related financial impacts we’ve seen in recent years from rising sea levels and extreme heat events.

How you can vote your conscience

You can tell BlackRock to vote against the re-election of Lee Raymond directly!  Follow the instructions in the link and have your voice be heard!

Your Stake’s online petition platform for investors is another valuable resource. Users sign up with their retirement accounts to participate in campaigns asking companies to act on environmental and corporate accountability issues. Involvement from ordinary investors – which likely means you – is crucial to the Your Stake effort and letting asset managers know your priorities. UCS and Your Stake have set up a campaign encouraging asset managers to vote for better climate policy – if you have a moment, we’d like you to take a look at it. There are opportunities to add your voice to thousands of others and have it be heard by Wall Street.