Three letters BlackRock CEO Larry Fink never wants to hear again: ESG.
The company supported just 26 environmental-social-governance proposals at annual company meetings in the 12 months leading up to June, continuing its declining support of ESG initiatives, according to its latest investment stewardship voting report.
ESG No Go
But this isn’t a sudden shift for BlackRock. In 2021, it supported nearly half of global shareholder ESG initiatives. A year later, it dropped to 22%, and has now fallen to 7% in the past 12 months. The pullbacks are partly to avoid political headaches but the financial juggernaut also acknowledged that some initiatives were “unlikely to help promote long-term shareholder value.”
Political conservatives have been on the attack over pretty much anything that can be classified as ESG. Earlier this summer, a group of House Republicans led by Rep. Bill Huizenga (R-Mich.) highlighted anti-ESG measures they aim to pursue, declaring that “ESG initiatives often fail to generate robust financial returns.” And last year, 19 GOP attorneys general asked the Securities and Exchange Commission to investigate BlackRock’s push into ESG policies, saying that it hurt state pensions as well as the oil and gas markets.
BlackRock also said it views many of the latest shareholder ESG proposals from companies it invests in as “overreaching, lacking economic merit, or simply redundant”:
- Last year, BlackRock supported a measure that would require Amazon to report how much plastic packaging it uses. When a similar proposal was brought up this year, BlackRock voted against it since Jeff Bezos & Co have already started supplying those plastic reports. BlackRock also voted against resolutions that would require companies like Chevron, Exxon, and Goldman Sachs to set absolute emissions reduction targets.
- Fink recently said while BlackRock is still committed to policies that address lowering carbon emissions and workplace discrimination, he’s stopped using the term ESG because it’s often “weaponized” by both the right and the left.
It’s a Numbers Game: BlackRock’s ESG pivot follows an industry-wide trend. The Financial Times reported that median support for ESG resolutions across the board fell to 15% in 2023 from 32% in 2021. Asset manager State Street backed 32% of ESG resolutions in the first half of this year, down from 44% in the same time a year prior. Last year, Vanguard pulled out of the Net Zero Asset Managers initiative, with CEO Tim Buckley telling the FT, “Our research indicates that ESG investing does not have any advantage over broad-based investing.”
Both BlackRock and State Street reported that their diminished support is also a result of recent changes made by the SEC that make it difficult for companies to block shareholder ESG petitions. With more resolutions coming in, more are going to be shot down.