Key Impact Points:
- Declining Support for ESG Proposals: BlackRock backed only 4% of environmental and social proposals in 2023-24, a decrease from 6.5% the previous year.
- GOP Scrutiny and Subpoenas: The Republican Party’s growing scrutiny of ESG investing has led to investigations, including subpoenas of BlackRock.
- Focus Shifts to Corporate Governance: BlackRock increased its support for corporate governance proposals, with an emphasis on enhancing shareholder rights.
Overview
BlackRock, the world’s largest asset manager, has reduced its support for ESG (environmental, social, and governance) proposals in the wake of increasing Republican scrutiny. According to BlackRock’s latest proxy voting report, the company supported only 4% of environmental and social proposals in the 2023-24 proxy year, down from 6.5% last year. The decrease comes as BlackRock faces pressure from U.S. lawmakers, particularly from the Republican Party, who have raised concerns about the legality and impact of ESG-focused investing.
GOP Pushback
Republicans have been vocal about their opposition to ESG investing, questioning whether financial firms like BlackRock are prioritizing political or social agendas over fiduciary duty. In December 2023, Judiciary Committee Chairman Jim Jordan (R-OH) subpoenaed BlackRock and other financial institutions for documents related to their ESG practices. Critics allege that ESG investing may violate antitrust laws and that it could distort financial markets by pressuring companies to adopt non-financial objectives.
BlackRock’s Justification for Decreased ESG Support
In its report, BlackRock explained that many of the shareholder proposals on climate and social issues were “overreaching” and “lacked economic merit.” The company found that many proposals focused on business risks that were already being addressed by companies, making them redundant.
“A significant percentage were focused on business risks that companies already had processes in place to address, making them redundant,” the report stated.
Despite this pullback, BlackRock reaffirmed its commitment to responsible investing but emphasized that proposals must align with long-term shareholder value, rather than being purely issue-driven.
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Shifting Focus to Corporate Governance
While BlackRock scaled back its support for environmental and social proposals, it increased its backing for corporate governance-related proposals, which it views as crucial for enhancing shareholder rights. These included initiatives aimed at strengthening the rights of minority shareholders.
In the report’s foreword, BlackRock noted: “We remain committed to supporting proposals that align with long-term shareholder value, particularly those that enhance corporate governance and shareholder rights.”
Empowering Clients Through Direct Voting
Amid the growing scrutiny, BlackRock has also made efforts to give its clients more direct control over their voting power. Through its expanded voting choice program, clients can now vote directly on shareholder proposals. This program was extended to include BlackRock’s largest exchange-traded fund (ETF), giving investors greater influence over corporate decision-making.
Additionally, BlackRock introduced a climate and decarbonization stewardship option for certain funds with explicit climate-related objectives. As of July, this option covers 83 funds with $150 billion in assets under management.
Conclusion
BlackRock’s reduced support for ESG proposals signals a cautious shift in its strategy as it navigates increased political pressure from Republicans. By focusing more on corporate governance and giving clients greater voting power, BlackRock is balancing its ESG commitments with long-term shareholder value, while responding to concerns about the role of politics in investing.
Related Article: From ‘Wait and See’ to ‘Lead and Succeed’: Global Standards Are Shaping the Future of ESG Reporting – Deloitte Report
