![]() BlackRock would be aligning its investment approach, including how it votes proxies, with sustainability. This year in BlackRock’s annual letter, Fink stated that climate risk is changing the fundamentals of the financial system. He went on to say that companies need to engage their stakeholders and if they wait until they receive a proxy proposal to engage, “ we believe the opportunity for meaningful dialogue has often already been missed”. Recall that two years ago Larry Fink, CEO of BlackRock, the world’s largest asset manager, told CEOs that to sustain financial performance they must “ understand the societal impact of your business as well as the ways that broad, structural trends – from slow wage growth to rising automation to climate change – affect your potential for growth”. The silver lining highlighted by Morningstar is Blackrock. In response, these fund managers claim to ‘engage companies privately’. Their support would have caused 19 of 23 resolutions earning more than 40% support to pass if supported by just one of the largest two asset managers. Rowe Price, and DFA- voted against more than 88% of ESG-related shareholder resolutions. However, they found that five of the 10 largest fund families -Vanguard, BlackRock, American Funds, T. Average support for ESG shareholder resolutions across the 50 fund families analyzed rose from 27% in 2015 to 46% in 2019. This excludes the proposals which were withdrawn based on company agreements. Given these trends, it is not surprising to read Morningstar’s recently released proxy voting report stating investor support for ESG resolutions reached a record high in 2019 averaging 29%. These long-term and diversified owners have no way to exit a stock, so the only way to influence shareholder value at a portfolio company is through exercising active ownership rights. When you buy these funds, you transfer your fiduciary responsibility to fund managers to engage companies and vote proxies for you. equity holdings, they take on a growing fiduciary responsibility. As open-end and exchange-traded mutual funds managed by large asset managers make up a growing portion of U.S. ![]() human rights, labor rights, diversity).Īnother trend in the investment world is the disproportionate growth of passive investing. sustainability reporting, climate, water) and more recently, social impacts (e.g. proxy access, political and lobby spending, executive pay, separate chair) to corporate environmental impact (e.g. SRI concerns have also broadened from governance issues (e.g. US SIF reported two years ago that $1 in every $4 of professionally managed assets in the U.S utilize ESG criteria or shareholder advocacy, a double digit annual increase since the mid-1990s. ![]() Much has been written about socially responsible investing becoming mainstream. Shareholder actions BlackRock, Larry Fink 1 Comment I pray for an abundance of “great courage and commitment.” Time will tell if 2021 will be any different. Nonetheless, when it comes to voting their proxies, BlackRock, like Lucy, yanks the ball away (See: BlackRock voted against climate resolutions over 80% of the time in 2020). We’ve seen these letters each year from Fink, and we have written about our reactions to them before. As a consequence, Charlie Brown flies into the air, falls down on his back, and hurts himself. Charlie Brown runs up to kick the ball, but at the very last moment before he can kick it, Lucy removes the ball. Then, Lucy says something to persuade Charlie Brown to trust her. Initially, Charlie Brown usually refuses to kick it, not trusting Lucy. Time and again, Lucy tells Charlie Brown that she will hold a football while he runs up to kick it. I loved this line: “And now, business leaders and boards will need to show great courage and commitment to their stakeholders.”Īt the same time, I am reminded of the “Peanuts” comic. Improved data and disclosures will help us better understand the deep interdependence between environmental and social issues. For example, climate change is already having a disproportionate impact on low-income communities around the world – is that an E or an S issue? What matters is less the category we place these questions in, but the information we have to understand them and how they interact with each other. But it is misguided to draw such stark lines between these categories. Questions of racial justice, economic inequality, or community engagement are often classed as an “S” issue in ESG conversations. ![]() I’ll call your attention to this nugget near the letter’s conclusion: Again, we at SGI are heartened by Fink’s words. As usual, the New York Times devoted significant coverage to it. Today, BlackRock’s Larry Fink issued his 2021 letter to CEOs.
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