Some of Wall Street’s largest asset management companies are failing to live up to commitments to use their voting power to fight the climate crisis, according to a new report.
The report, published on Tuesday by the Washington DC-based Majority Action and the Climate Majority Project, claims that BlackRock Inc, the world’s largest asset manager with more than $6tn under management, and Vanguard, with assets of $5.2tn, have voted overwhelmingly against the key climate resolutions at energy companies, including a resolution at ExxonMobil’s annual shareholder meeting, and at Duke Energy.
Had BlackRock and Vanguard not torpedoed these investor efforts, at least 16 climate-critical shareholder resolutions at S&P 500 companies would have received majority support in 2019, representing a significant corporate shift on climate, the report claims.
Refusing to use their proxy votes to support shareholders’ resolutions means letting companies off the hook – even as the climate crisis threatens their investors, their business models and the planet, the group says.
“The climate crisis is well upon us, and leading investors are stepping up to press fossil-fuel-dependent companies to align their strategies to the goals of the Paris agreement but some of the largest US investment companies are severely lagging,” said Majority Action’s Eli Kasargod-Staub.
“Blackrock and Vanguard have been using their shareholder voting power to undermine, rather than support, investor action on climate, including opposing every one of the resolutions proposed by the $34tn Climate Action 100+ coalition, calling for significant board room reform in response to its failure to act on climate change,” Kasargod-Staub added.
Blackrock published a report in April on climate-related risk stating: “Climate change is a risk investors can’t ignore.” Vanguard publishes an annual “investment stewardship” report outlining its commitment to sustainable investing.
Majority Action, which delivered a petition of 129,000 petition signatures to Blackrock in April, claims it ranks at the bottom of the list of fund managers using their voting powers to force companies to act responsibly on climate.
“We have the largest investment stewardship team in the industry and engage with companies even in the absence of shareholder proposals,” Blackrock said in a statement to the Guardian.
“We support shareholder proposals that we believe will enhance the value of our clients’ investments. But not all shareholder proposals are created equal, and it would be wrong to equate good governance with voting against management without regard for a proposal’s impact.”
While funds like Blackrock and Vanguard may not be using their proxy power to force change, there is evidence that some of their funds are moving toward investing under environmental, social and governance (ESG) criteria.
Blackrock has launched an array of sustainable equity exchange-traded funds, and it offers clients direction to build portfolios focused on companies that are likely to offer returns on clean-energy investments. Meanwhile, Abu Dhabi’s $800bn sovereign-wealth fund recently added a new criterion to its investment process: how will the Earth’s changing climate affect a potential asset’s price?
According to the data provider EPFR Global, the total value of funds that have integrated ESG factors into their investment process has more than quadrupled since 2014, rising to $485bn as of April. Funds that may not be explicitly listed as ESG are also investing with the climate in mind.
Blackrock holds that its 45-member environmental stewardship team engaged 250 companies last year on the subject of climate change. It says singling out the use of proxy votes is misleading because it ignores the totality of Blackrock’s engagement on the issue.
In its 2018 stewardship report, the company said its discussion with clients addressed the robustness of board oversight, ESG disclosure frameworks, climate risk management, environmental impact management and sustainability around waste, water, energy efficiency, packaging and product life-cycle management.
Nicholas Eisenberger at the advisory firm Pure Energy Partners said he was encouraged by the growing awareness of the urgency of the climate crisis in the business sector.
“Large asset managers are just at the beginning of taking the urgent actions required to more aggressively confront the threat of climate change,” he said, describing them as battleships at the start of an emergency corrective turn.
“We seen a fundamental shift in the last two years in the understanding of the dangers climate change presents but the steps we’ve taken are nowhere near adequate to the task yet.”