Larry Fink grabbed a lot of headlines back in January when the chairman and CEO of BlackRock, the world’s largest investment management firm, issued a letter calling for a “fundamental reshaping of finance” in response to climate change and the risks it poses.
Stating that every company and shareholder must confront these risks, Fink committed BlackRock to voting against management and board directors at companies not making sufficient progress on sustainability-related disclosures, and business plans and practices.
Exactly what progress would be deemed sufficient was only vaguely defined, and nine months on, Fink and BlackRock are getting mixed reviews on the company’s performance to date. “Climate in the Boardroom,” a new report from the nonprofit Majority Action, calls out not only BlackRock, but a number of other large investment firms for their voting records on key management- and climate-related issues.
Even for the 45% of Americans who don’t own stocks, the role of these large asset managers can be critical, says Eli Kasargod-Staub, executive director of Majority Action. They can tip the balance, one way or the other, on board decisions that have “outsized effects” on individuals and communities, he said.
“Whether an electric power company chooses to prioritize solar power or natural gas infrastructure is going to have tangible effects on whether an entire region of the country is able to decarbonize,” he said.
The Majority Action report finds that this year alone BlackRock and Vanguard, the world’s second largest investment manager, helped vote down dozens of “climate-critical” resolutions at companies, including utilities, that are “systemically important carbon emitters.” For example, the opposition of both firms was decisive in sinking shareholder resolutions that would have required key utilities — Duke Energy, DTE Energy and NextEra Energy — to report on their political contributions.
Small changes not sufficient
A recent column in Greentech Media took a more positive view, giving BlackRock credit for incremental change, such as company’s growing support for renewables, which includes a 10.3% stake in inverter manufacturer SolarEdge. BlackRock is also gradually moving away from coal, cutting its stake in major coal producer Peabody Energy from 6.3 million to 5 million shares, the article says.
While such small changes may not be sufficient progress for some activists — Kasargod-Staub called them “tinkering at the edges” — they underline the major impacts that decisions made in corporate boardrooms may have for renewables and clean technology going forward.
Looking at the eight largest U.S. investor-owned utilities that have committed to going carbon neutral by 2050 or earlier, the report finds some of those commitments carefully hedged. Both Southern Company and Duke Energy anticipate ongoing reliance on coal and potentially building new natural gas plants, the report says.
Further, whether a utility has or hasn’t committed to carbon-neutral operations made no difference on either BlackRock or Vanguard’s voting record. Majority Action found both companies voted for utilities’ company-proposed directors 99% of the time, as did five other large investment firms.
The report’s recommendations urge asset owners and managers to push corporate boards for better accountability on setting and reaching climate goals. Changing investment managers should also be considered if corporate action and accountability on climate are lagging,
Even with the 2050 deadline for carbon neutrality, utilities must do “everything they can in the next 10 years to eliminate as much of their current carbon emissions as they can,” Kasargod-Staub said. Decarbonizing the grid and electrifying transport and other sectors of the economy with clean energy are the linchpins, he said.
Shareholders’ power should not be underestimated. “Getting all the way to net-zero is hard,” he said. “What happens in electric power company boardrooms is absolutely determinative of whether or not you’re actually decarbonizing the electric power sector rapidly or slow-walking that in the way many companies have.”
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