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BlackRock, Vanguard accused of opposing shareholder efforts on climate

The firms voted against all three of the U.S. shareholder proposals backed by Climate Action, which works to pressure the largest emitters of greenhouse gases to align themselves with the Paris Agreement goals.

BlackRock and the Vanguard, the two largest asset managers, are falling short as shareholders in combating the risks of climate change, according to nonprofit group Majority Action.

The group examined the proxy voting of 25 of the top global asset managers to assess their role in pressuring U.S. energy, utility and auto companies to cut greenhouse gas emissions and disclose their lobbying activities. BlackRock and Vanguard overwhelmingly favored directors proposed by companies, according to the group’s report on Tuesday. The firms also voted against at least 16 climate-related shareholder proposals in which their support would have given the measures majority support.

As the threats from global warming have intensified, some large asset managers voted more assertively to urge the companies to reduce their carbon footprint. BNP Paribas and Pimco led the way, voting in favor of almost all the 41 climate-change resolutions examined. They ranged from calling for the adoption of greenhouse gas emission targets to more disclosure of political and lobbying activities.

BlackRock and Vanguard were much less likely to back the resolutions, with both supporting less than 15% of them.

“If they don’t change course, then BlackRock is going to go down in history as one of the few actors that actually had the power to move the needle on climate change and protect long-term shareholder value but actively chooses not to,” said Eli Kasargod-Staub, executive director at Majority Action, which works with shareholders on corporate accountability and is funded by foundations.

BlackRock said that it supports shareholder proposals to enhance the value of its clients’ investments. “But not all shareholder proposals are created equal, and it would be wrong to equate good governance with voting against management without regard for a proposal’s impact,” spokesman Farrell Denby said in a statement.

Vanguard said in response that it regularly meets with companies and that this engagement, in addition to shareholder voting, can lead to meaningful changes. In this proxy year, Vanguard engaged with about 250 companies in carbon intensive industries and their disclosure and governance on climate change was often discussed, said spokeswoman Carolyn Wegemann.

BlackRock and Vanguard broke with Climate Action 100+, a group of money managers overseeing more than $33 trillion, during this proxy season. The firms voted against all three of the U.S. shareholder proposals backed by Climate Action, which works to pressure the largest emitters of greenhouse gases to align themselves with the Paris Agreement goals. BlackRock and Vanguard aren’t members of the group.

The correlation between fees and performance is not “apples-to-apples when taking the funds’ underlying exposures into account,” an expert says.
July 17

One Climate Action-backed resolution called for an independent board chair at Exxon Mobil because it hasn’t set business-wide greenhouse gas emissions targets or disclosed emissions associated with the use of its products. It would have passed if BlackRock and Vanguard had supported it, the report said.

Resolutions at General Motors and Ford Motor said the automakers should improve disclosure about their lobbying efforts on climate change after a trade group lobbied the Trump administration to weaken fuel economy standards. Pimco and Legal & General Investment Management voted for all three proposals.

Behemoths in index investing, BlackRock and Vanguard have long argued that their efforts to address climate change center on continued engagement with management of the companies they own. The firms are among the largest owners of most U.S. companies because of their passive funds, which buy and sell assets based on their inclusion in an index.

BlackRock said it is holding more in-person meetings about climate risks, according to its most recent stewardship report. The firm engaged 207 companies globally on the topic of climate risk in the past year, Denby said.

Both firms also offer funds designed to have positive environmental, social and governance traits. They say these offerings provide investors choice, and the opportunity to reward responsible public companies.

Bloomberg News