BlackRock pulls back support for shareholders' environmental, social proposals

The world’s largest asset manager BlackRock has trimmed its support for proposals from shareholders relating to environmental and social efforts.

The latest move, indicated by the USD 127 billion firm in its annual global voting report,  sees the firm backing 4% of 493 proposals, down 7% over the last 12 months. It’s a running trend of three years. Overall, BlackRock dropped its support to 16% from 19%.

"In our assessment, the majority of these (proposals) were over-reaching, lacked economic merit, or sought outcomes that were unlikely to promote long-term shareholder value," BlackRock said in the report on Wednesday.

“A significant percentage were focused on business risks that companies already had processes in place to address, making them redundant,” it added.

The asset manager was supportive of management’s position 88% of the time as it voted on more than 169,200 proposals globally, consistent with its voting trend of recent years.

However, it pulled support for 128 proposals at around 104 companies citing concerns over inadequate disclosure or effective oversight from the board in relation to climate risks.

The firm also indicated an uptick in proposals that aimed to force companies to pull back on plans to manage sustainability risks, including changes operations to align them with climate goals.

BlackRock supported none of the 88 such proposals.

Its wider backing of shareholder proposals – up to 11% from 9% – related to its focus on governance.

"The proposals we supported sought to enhance minority shareholders' rights, for example, by introducing simple majority voting. Market support for governance proposals also increased relative to last year," it said.

Industry tracker Morningstar noted BlackRock’s support for ESG proposals, meanwhile, remained unchanged.

BlackRock’s statement amid the start of AGM season, follows it’s January signal of a move to push company boards on resilience issues.

At the time, BlackRock noted the emergence of a “new economic regime” that would see company performance assessed on the basis of how boards managed growing mega-trends, including the energy transition and the surge of AI.

Several issues, including higher inflation, higher interest rates and tighter banking regulation is leading companies to review their businesses amid a climate of lower growth and higher capital costs, BlackRock noted.

"They are considering how to adapt to a reshaping financial landscape, as banks face tighter regulation and greater competition for customer deposits and the supply of credit from banks tightens," it said in the report entitled "Financial resilience in a new economic regime".

"CEOs and CFOs are thinking about how to unlock operational efficiency, optimize their balance sheets, and enhance capital allocation."

Four structural shifts would shape the new economic regime, it added, noting digital disruption and AI, geopolitical fragmentation and economic competition, the low-carbon transition and demographic divergence.

"Against the backdrop of these shifts, we expect to see a wider range of company performance – with companies that can harness these forces and capitalize on them outperforming, while those that struggle to adapt could underperform," it said.

"That wider range of outcomes – and the uncertainty that comes with it – is reflected in an unusually wide range of analyst estimates of future company earnings."

Energy voting 

The company also outlined the trend of issues cropping up in the energy sector, including mega deals in the US which have sparked consolidation to reshape the energy landscape.

Alongside this, the firm noted the intentions of major European oil and gas majors who are looking to ensure returns for shareholders.

“By and large, these companies continued to receive shareholder support for their pragmatic approach in balancing near-term consumer demand for energy security and affordability with their long-term plans to invest in technologies that support their business as it transitions to a low-carbon economy,” BlackRock said.

Noting instances of voting on climate-related risks and opportunities, the asset manager flagged Italian energy company Saras SpA. BlackRock did not support the company's election of directors due to “continued concerns about a lack of material, climate-related disclosures”.

“Compared to its  industry peers, Saras’ disclosures do not provide investors with sufficient information to assess its approach to climate-related risks and opportunities, including the transition to a low-carbon economy,” BlackRock said, noting it previously voted to indicate concerns in 2021, 2022, and 2023.

It also noted its vote in favour of Shell’s latest energy transition plans, in which the company received ~78% shareholder support.

However, it also flagged that Shell did not receive its support for adoption of its Scope 3 emissions targets, proposed at the 2024 AGM, which included a plan to “align its medium-term emissions reduction targets covering the GHG emissions of the use of its energy products (Scope 3) with the goal of the Paris Climate Agreement: to limit global warming to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C.”

BlackRock said: “In our view, the proposal was overly prescriptive and would contradict the Energy Transition Strategy 2024 put forward by the board and management team.” -PS

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