ESGDecember 11, 2020

BlackRock to Double Down on Climate Offenders in 2021

The firm will boost shareholder challenges in 2021 over sustainability issues and expand its probes to twice as many companies as before.

Reported by Sarah Min

BlackRock, the world’s largest asset manager, will step up its sustainability efforts next year by more than doubling the number of companies it will scrutinize for climate transgressions.

In 2021, the firm will start reviewing 1,000 of what it believes are the world’s worst climate offenders, up from 440 this past year, according to BlackRock’s “Our 2021 Stewardship Expectations,” released Thursday. The $7.4 trillion asset manager plans to take shareholder action against any businesses that are not making significant efforts to curb carbon emissions.

“We will step up our engagement efforts with this universe and consider accelerated voting actions should the substance of companies’ climate-related commitments and disclosures not meet our expectations,” BlackRock said in its report.

Arguably the biggest sustainability advocate in the investing world, BlackRock made good on its promise to take action against companies this past year. Of the 440 companies it scrutinized, BlackRock took voting action against 55 directors and put another 191 directors on notice for next year, in the fiscal year ending June.

BlackRock said shareholder actions against directors have been effective in the past. Voting actions to revise pay policies resulted in changes at 83% of companies, while votes to increase board diversity occurred in 41% of firms.

How has BlackRock fared in its sustainability quest? Since July, challenges it backed at three businesses, aiming to elicit environmental disclosures, have had mixed results. The criteria it used to judge the companies were based on the framework created by the Task Force on Climate-related Financial Disclosures (TCFD).

At Australia’s largest power company, AGL, a proposal asking it to disclose a plan to retire its coal plants by 2035 garnered support from just 20% of voting shareholders. At Spanish airport operator Aena, a bid to give shareholders a say on climate plans was met with 95% approval. At Denmark-based bioscience company Chr. Hansen, a request to submit better TCFD climate disclosures was dismissed by the board.

BlackRock’s move to step up its efforts, along with increasing regulatory interest in climate change, has advocates hopeful that broader changes are coming for the financial sector after President-elect Joe Biden takes office in January.

This week alone, the New York State Common Retirement Fund (NYSCRF) said the companies in its portfolio would reach net zero by 2040, a more ambitious goal than the 2050 objective typically set by institutional investors. Meanwhile, the California State Teachers’ Retirement System (CalSTRS) joined an activist push to elect four new board members to ExxonMobil.

BlackRock has been dialing up the heat on climate offenders for some time, particularly after CEO Larry Fink’s bombshell letter this year to CEOs. Fink’s missive sent shockwaves throughout the financial world after he said he would set sustainability as the standard for investments.