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For shareholder engagement on climate, is talk enough?

ImpactAlpha, Sept. 3 – Blackrock and Vanguard voted against shareholder resolutions pressing climate change concerns in the past year at Exxon, Duke Energy, Dominion Energy, GM and Ford, among others. The two asset-management giants have both called for greater corporate consideration and action on social and environmental issues and both endorsed the recent statement on corporate “purpose” from the Business Roundtable. But when it comes to wielding voting power to compel corporate change, BlackRock and Vanguard often favor talk over action. In a review of climate-related shareholder resolutions, Majority Action, a nonprofit shareholder activism organization, found the two biggest asset managers worldwide opposed proposals to supporting independent chairmanships and climate-related lobbying disclosures.

  • In their own words. BlackRock and Vanguard emphasize responsible social and environmental policies in their latest stewardship reports. Per BlackRock: “Over our clients’ long-term investment horizon, in our experience, companies with leading practices in [social and environmental] areas are more likely to deliver sustainable financial returns.” And per Vanguard: “We believe that many core governance functions— such as robust board oversight and meaningful company disclosure—are imperative for managing climate risk.” 
  • Voting record. Two years ago, BlackRock and Vanguard voted to pass a resolution calling for greater transparency from ExxonMobile on the company’s climate impact and risks. This year, they voted down two other climate-related resolutions against Exxon, including one which blamed Exxon’s unsatisfactory progress on “a board that is not functioning” and calling for an independent chairman.“Instead of using their considerable shareholder power to promote leadership on climate change, BlackRock and Vanguard are wielding it to shield industries driving the climate crisis from accountability,” wrote Majority Action’s Eli Kasargod-Staub. 
  • Diplomacy first. BlackRock and Vanguard say direct engagement with corporate boards and leadership is their preferred approach to coaxing corporate change. “While voting at shareholder meetings is important, it is only one part of the larger corporate governance process,” a spokeswoman for Vanguard told ImpactAlpha. Without addressing specific resolutions, she wrote in an email that some of the recent shareholder proposals on climate change were “too prescriptive to have a positive impact.” Instead, She said: “we have pursued an engagement strategy that focuses on boards’ climate governance and oversight of climate risk or climate strategies, and on comparable and investor-relevant disclosures.” A BlackRock spokesperson referred ImpactAlpha to the firm’s 2019 Investment Stewardship Annual Report. A separate report found that over the past decade, BlackRock’s fossil fuel investments have lost investors $90 billion in value, Three-quarters of those losses came from investments in ExxonMobil,Chevron, Royal Dutch Shell and BP.

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