At the beginning of the year, Larry Fink, the billionaire CEO of BlackRock (BLK), urged CEOS in his annual letter to take action on climate change as doing nothing would be a long-term investment issue.
“Climate risk is investment risk,” Fink wrote.
But according to a new analysis from Morningstar of the company’s proxy votes regarding climate change, action has not backed up the letter. When the measures have come up at the publicly traded companies in BlackRock’s portfolios, the company has voted against climate change measures more than 80% of the time.
In January’s letter, Fink wrote that BlackRock would be “increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
Companies and their directors, Fink wrote, “should be held accountable.” He added that the company voted against or withheld votes from 4,800 directors at 2,700 different companies because they didn’t adequately address climate risk.
Fink and BlackRock said they would be asking companies to publish and disclose data around sustainability and operate as if the Paris Agreement on climate change is fully realized (Trump pulled the U.S. out of the accord in 2017).
"We believe that a company is not effectively addressing a material issue,” Fink wrote. However, the BlackRock votes on resolutions supporting more climate risk disclosure decreased from 25% support to just 14% from 2019 to 2020.
In comparison, support went up considerably for State Street (38% to 55%), Vanguard (25% to 36%), and Fidelity (38% to 64%).
"Continued low support for climate change proxy resolutions at BlackRock is therefore particularly notable," Morningstar wrote. And with BlackRock’s loud support of climate initiatives — and marketing campaign in early 2020 around the letter — it’s even more notable.
In a statement to Yahoo Finance, Blackrock said that its focus this year was “primarily focused on engagement and holding directors accountable,” as opposed to engagement. The company said that it had identified 244 companies as not doing enough and took voting action against 53%, keeping the rest “on watch.”
In 2021, BlackRock added, the company anticipates more engagement and voting.
“We are currently reviewing our engagement priorities and voting guidelines and will provide more detail in the coming months, including how we intend to reflect them in our voting actions in the next proxy season,” the company said in a statement to Yahoo Finance.
2020’s climate voting: fewer votes but more progress
Morningstar pointed out that 2020 has seen far fewer climate votes than usual, perhaps a factor of the coronavirus and short-term risk taking priority. This could also be explained by the fact that many of these companies are taking matters into their own hands without the need for a proxy vote. Not all companies are taking action on their own, however. The SEC has sided with companies that want to leave measures off the ballot, Morningstar wrote.
Only 14 measures around climate risk disclosure have been voted in this year, compared to over 30 in 2018 and 16 in 2019. However, most of BlackRock's peer group has increased support. In 2020, average support for these measures is 40%, far higher than Fink.
In further detail, Morningstar tallied 34 total resolutions — the 14 disclosures and 20 others that had to do with climate change — and found that BlackRock came in last among its peers, lending its support just 12% of the time. Fidelity's Geode branch, which runs their index funds, came in first with 56% support.
The support likely matters. Most of these votes did not pass; however, one of them, at JPMorgan (JPM) came just shy of a majority at 49.6%. BlackRock’s ESG funds voted against it, as well as Vanguard’s. The average earned 37% support, Morningstar calculated.
The JPMorgan vote was just one of many votes in which the investment giant did not vote with shareholders in favor of climate change measures.
For Dollar Tree (DLTR), one notable case Morningstar found, 74% of shareholders agreed with a proposal to set and disclose greenhouse emissions targets. However, BlackRock's ESG funds voted against the measure. (Vanguard's ESG funds supported.)
While it’s expected that non-ESG funds might vote against measures — they are short-termists and have not voted as if climate risk is an existential threat as Fink’s letter positions it — ESG funds are marketed as the investment vehicle for people with conscience, who care about investing but also environmental and other ethical issues. Morningstar’s findings cast a shadow over ESG as potential greenwashing, providing a lesson to anyone who gravitates towards an ESG fund: Don’t just see how the fund invests — see how the fund votes, too.