5/3/2021 BlackRock Starts to Use Voting Power More Aggressively - WSJ

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MARKETS

BlackRock Starts to Use Voting Power More

Aggressively
Asset manager signals it is boosting its support of shareholder-led environmental, social and
governance proposals

BlackRock Chief Executive Larry Fink, shown during a virtual summit this week, writes an annual
letter to CEOs.
PHOTO: DANIEL ACKER BLOOMBERG NEWS

By Dawn Lim
April 30, 2021 5 30 am ET

Listen to this article

7 minutes

The world’s largest asset manager is showing it is more willing to use its heft to influence
the policies of the companies it invests in.

BlackRock Inc. BLK -0.97% has so far increased its support for shareholder-led
▲

environmental, social and governance proposals, and published a slew of criticisms of

public companies that haven’t bent to its overall requests.

The firm votes on behalf of the investors in its many funds. For the roughly 170 ESG
shareholder proposals it voted on during the first half of the proxy year, BlackRock backed
91% of environmental proposals, 23% of social proposals and 26% of corporate-governance
proposals.
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5/3/2021 BlackRock Starts to Use Voting Power More Aggressively - WSJ

That included voting for a proposal to make it easier for shareholders to push for changes
at Tesla Inc. and another to make Spanish airport operator Aena SME SA publish carbon-
emission reduction plans. Most of the votes for the proxy year come in the six months
ending in June.

For the 1,000-plus proposals for the year ended in June 2020, BlackRock backed 6% of
environmental proposals, 7% of social proposals and 17% of governance proposals.

The irm oversees $9 trillion in assets.

PHOTO: JEENAH MOON BLOOMBERG NEWS

“BlackRock has strongly signaled that quiet diplomacy is not the only tool in its
toolbox,” said Rich Fields, a partner at law firm King & Spalding who focuses on
corporate-governance issues. “We expect more votes for shareholder proposals and
against directors in this and future years.”

The money manager has been previously attacked for being all talk and no action on its
loud calls for companies to focus on ESG issues. Whether the firm overseeing $9 trillion in
assets will wield votes it controls for investors more aggressively for the rest of the
shareholder voting year remains to be seen.

BlackRock’s initiatives are part of a broader push by Wall Street—institutional investors,

money managers and banks—to wield influence through their investments.

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Clout Deployed
Percentage of S&P 500 companies where
BlackRock funds are among the top three
shareholders
%

Energy

Communication
services
Consumer
discretionary
Consumer
staples

Materials

Industrials

Financials

Health care

Information
technology

Utilities

Real estate

Note: WSJ analysis of data available in early 2021

Sources: Dow Jones Market Data (sectors); S&P
Global Market Intelligence (shareholder data)

The firm is one of the top three shareholders of more than 80% of the companies in the
S&P 500, according to S&P Global Market Intelligence, through its many funds. The money
manager casts a long shadow on shareholder meetings where it can vote on behalf of its
investors on board directors, executives’ pay packages and other company matters.

BlackRock has traditionally deferred to the companies’ management for the bulk of votes.
On votes involving the makeup of boards, BlackRock voted against company
recommendations 8% of the time during the year ended in June 2020.

The firm’s new stewardship head, Sandy Boss, said BlackRock made changes over the past
year to ensure its votes were in line with its investment priorities.

“We are going through a period of change to align our investment convictions with the
firm’s message,” she said.

Each year, Chief Executive Larry Fink writes a letter to CEOs that says companies
shouldn’t cater solely to shareholders but be attentive to customers, workers and local

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communities to sustain returns.

Mr. Fink said in 2020 that BlackRock would be “increasingly disposed” to vote against
companies that weren’t reporting climate and other risks in BlackRock-endorsed formats
or demonstrating clear plans to address them.

The Securities and Exchange Commission warned this year that it would pay closer
attention to whether fund managers are voting as they say they would. A group of
Democratic senators complained in late 2020 that BlackRock’s voting record was
“troubling and inconsistent” with its pledge to push companies to manage climate risks.

BlackRock’s 60-person stewardship team develops guidelines for how companies should
handle issues it says protect returns for clients for the long term—such as making certain
boards are diverse and companies are prepared to reduce carbon emissions.

Talking to companies will remain the primary way BlackRock conveys its expectations to
companies, a spokesman said.

In a sign it is taking a more aggressive voting stance, the firm voted against—or withheld
votes from—proposals to re-elect individual directors 5,450 times in 2020, more than ever
before.

In April, BlackRock said it voted against a board director of Australian oil and natural-gas
producer Woodside Petroleum Ltd. due to the company not outlining targets for certain
emissions generated when customers use its products. A Woodside spokeswoman
declined to comment.

BlackRock said carbon-intensive companies should set goals to limit this specific category
of emissions, which companies can’t control in the same way as those generated by their
own operations.

Some executives worry they could face lawsuits from publicizing details on labor or
climate plans in areas where global disclosure standards don’t yet exist.

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Others have complained BlackRock’s recent votes have come without warning or a proper
rationale, said Ali Saribas, a partner at shareholder advisory firm SquareWell Partners.

“BlackRock’s approach will fuel a rising frustration among companies that believe
BlackRock’s stewardship team will most likely apply a tick-the-box approach given the
sheer volume of companies they passively own,” he said.

SHARE YOUR THOUGHTS

Should BlackRock be pushing companies to make changes based on the risks posed by climate
change? Join the conversation below.

Ms. Boss, the BlackRock stewardship head, said, “It’s important what we do is predictable,
consistent and also well-signaled in our policies.”

A spokesman for BlackRock said the firm made clear to companies last year that it would
be more active on climate voting, and has been speaking with large companies about
climate risks for at least three years. Regardless of how it votes in any one year, BlackRock
seeks to support companies over decades, not just years, he said.

Since 2020, BlackRock has stepped up pressure on more companies by publishing

criticism with online bulletins about key votes.

The firm has stayed away from the activist-investor playbook of seeking board seats—and
has avoided intervening on a company’s day-to-day management.

“It would be very hard for a passive fund manager to support a shareholder proposal that
addresses systemic risks but wades too far into dictating strategy,” said Jessica Strine,
CEO at advisory firm Sustainable Governance Partners.

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Britt Harris, head of the University of Texas/Texas A&M Investment Management Co.
PHOTO: LANCE ROSENFIELD PRIME FOR THE WALL STREET JOURNAL

In some cases, the firm’s prominent clients haven’t been shy about warning BlackRock’s
top boss away from weighing in on political matters.

After the money manager joined others in signing a statement opposing a Texas bill
regulating transgender access to public bathrooms in 2017, Britt Harris, then-investment
chief at Teacher Retirement System of Texas wanted a word with Mr. Fink.

Mr. Harris, who now leads the University of Texas/Texas A&M Investment Management
Co., told Mr. Fink that he respected the CEO’s personal views. But he didn’t want
BlackRock telling Texas what to do, according to people familiar with the men’s
exchanges.

As a reminder, he gave Mr. Fink Texas-themed cuff links.

Write to Dawn Lim at dawn.lim@wsj.com

Appeared in the May 1, 2021, print edition as 'BlackRock Starts to Use Voting Power Aggressively.'

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