Investment giant BlackRock indicated that it will continue to ask companies to disclose their climate-related strategies and emissions reduction targets, with the release of its 2023 Global Principles for its investment stewardship unit.
The updated principles, which set out the core elements of BlackRock’s stewardship activities, come as the firm faces growing political pushback, particularly from Republican politicians in the U.S., on its integration of Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More and climate-related factors in its investment, engagement and voting processes.
The U.S. anti-ESG push has seen Florida pull $2 billion in assets from BlackRock’s management, placed on a list of ESG-supporting asset managers subject to potential divestment by Texas, and subject to accusations of “boycotting” energy companies by 19 state Attorneys General. In a hearing last week a representative of the company was questioned by Republican lawmakers on the Texas Senate Committee on State Affairs who claimed that support for Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More was part of “pushing a narrow political agenda.”
Despite the pressure, BlackRock said in a summary of its updated principles that it has made “few changes” to its 2023 stewardship policies, outlining minor modifications to its disclosure recommendations for nature-related factors given the growing materiality of these factors, and in the timing of sustainability reporting, with a recommendation for companies to provide disclosures in advance of annual meetings to give investors time to assess the data.
Notably, the updated stewardship principles did include some language changes described by BlackRock as designed to “clarify meaning,” and which appear to respond to the political challenges the asset manager has been facing.
In last year’s summary of stewardship principles, for example, BlackRock said that it would ask companies to “disclose a plan for how their business model will be aligned with the global aspiration to reach net zero GHG emissions by 2050.” One of the key criticisms from the anti-ESG movement has been a claim that BlackRock has been forcing companies to adopt net zero business models. In this year’s policy document, BlackRock has revised its language to be clear that its focus is on disclosure regarding companies’ plans to address the global net zero transition, stating:
“…we encourage companies to include in their disclosure a business plan for how they intend to deliver long-term financial performance through a transition to global net zero carbon emissions, consistent with their business model and sector.”
Adding additional clarity on its policy, BlackRock added:
“It is, of course, up to each company to define their own strategy: that is not the role of BlackRock or other investors.”
Additionally, last year’s summary’s discussion of understanding companies’ approaches to the energy transition stated that BlackRock recognizes that “some continued investment is required to maintain a reliable, affordable supply of fossil fuels during the transition,” and asked companies to “disclose how their capital allocation across alternatives, transition technologies, and fossil fuel production is consistent with their strategy and their emissions reduction targets.”
By contrast, the new principles remove the words “fossil fuels,” and change “some continued investment” to “continued investment,” and encourages companies “to disclose how their capital allocation to various energy sources is consistent with their strategy.”
The updated policy also makes it clear that “divestiture of carbon-intensive assets is unlikely to contribute to global emissions reductions.”
BlackRock also states explicitly that its interest in climate-related risk and opportunities is no different from any other material factor, writing: “as long-term investors we are interested in understanding how companies may be impacted by material climate-related risks and opportunities – just as we seek to understand other business-relevant risks and opportunities.”
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