Larry’s naughty step
BlackRock’s green pivot now comes with hard numbers. The $6.5 trillion asset manager said on Tuesday it voted over the past 12 months against 53 companies it deemed to be dragging their feet on climate change. That’s an improvement on the six firms that earned BlackRock’s opprobrium the previous year – and is better aligned with Chief Executive Larry Fink’s call to environmental arms in January. But BlackRock’s own oversight record also requires monitoring.
The 53 violators, which include Air Liquide, Exxon Mobil and Volvo, represent less than 3% of the 2,000 companies BlackRock engaged with on various environmental, social and governance concerns in the year to the end of June. That partly reflects the asset manager’s focus on the most carbon intensive sectors like energy, industry and utilities. But it’s also because Fink’s fund managers put another 191 companies “on watch” for potential voting action over the next 12 months, rather than voting against the re-election of board directors or in favour of shareholder climate-related proposals now.
This naughty step will be useful if it focuses minds. But as the case of Australia’s Woodside demonstrates, a gradualist approach can also leave BlackRock open to criticism. Fink’s group copped flak in May for failing to support a resolution calling for the energy firm to set binding targets for reducing the carbon emitted by its customers as well as its own production processes. Rushing through ill-considered action on these so-called Scope 3 emissions carries its own risks. But as with a call to abstain on one of Finnish utility Fortum’s votes, BlackRock risks looking more laggard than leader.
With most of its assets under management in passive strategies that can’t sell shares of companies that aren’t environmentally adopting best practices, BlackRock’s voting record is virtually the only way it can publicly signal that it means business. To avoid the brickbats, Fink will increasingly need to press his team to name and shame more companies.
It’s a way to win new business, too. European fund management ESG inflows between January and May were more than double the same period in 2019, according to Jefferies. That’s a big incentive for BlackRock to place its green oversight on its own watchlist.