BlackRock is enacting new guidelines that would allow clients with climate-focused objectives to vote differently on shareholder proposals than others — the asset manager’s latest move to navigate a political divide over ESG investing.
In an email to clients, BlackRock announced the new guidelines would consider companies’ efforts to limit the global temperature rise to 1.5 degrees Celsius above pre-industrial levels, an objective established in the Paris Accords.
However, the guidelines only apply to funds that have climate and decarbonization objectives — the majority of which are currently based in Europe. Eighty-three funds located in the region, valued at $150 billion in managed assets, have been approved to apply the guidelines, which will go into effect in the fourth quarter of 2024. Funds with climate-based objectives in the Americas and Asia are expected to adopt the guidelines in the second half of 2024 but are subject to board approvals.
The new policy comes as the asset manager navigates a tricky fight over considering environmental, social, and governance factors in its investment decisions. Republicans have protested the company’s, along with other asset managers’, consideration of sustainability, arguing it puts climate change ahead of yielding the highest returns for clients. Climate activists, on the other hand, have also put the company on blast for investing in fossil fuel companies.
The email also mentioned that clients who invest through separately managed accounts can apply the guidelines to their funds.
“The guidelines are only implemented for funds with climate and decarbonization objectives following the approval of the applicable fund board or at the explicit direction of clients in separately managed accounts,” Joud Abdel Majeid, the global head of investment stewardship, wrote in an email to clients. “For all other funds, BlackRock will continue to undertake our stewardship responsibilities with a sole focus on advancing clients’ long-term financial returns in line with our benchmark policies.”
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Climate-focused funds may take opposing positions from the rest of the group on climate-related shareholder resolutions — but would otherwise comply with the company’s main guidelines on ESG matters. The new guidelines, however, explicitly state it would not support proposals that seek to constrain “board or management decision-making or direct specific business or strategic decisions.” This includes proposals that would require commitments or actions related to climate risk or the low-carbon transition.
BlackRock CEO Larry Fink initially stood as a vocal supporter of ESG investing but has notably scaled back his push after being hit with attacks from Republicans who deemed the action “woke capitalism.” Last year, Fink stated he’s stopped using the term ESG because it has become too politicized.