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BlackRock Heats Up Climate Change Pressure On Boards

"The prominent asset manager BlackRock is taking steps to hold corporate governance accountable for failing to address the risks associated with climate change.  These steps will increase the pressure on boards to position environmental concerns for front and center strategic consideration. BlackRock is but one example of the increasing influence of third parties on how corporate governance addresses broader matters of social responsibility. Yet this comes at a time when boards are already struggling to adapt to a near-overwhelming agenda.

BlackRock’s approach on climate issues has been to focus on sectors and companies where climate change poses the greatest material risk to its clients’ investments. It defines “climate risk” to include “a company’s ability to compete in a world that has transitioned to a low-carbon economy (transition risk), for example, or the way climate change could impact its physical assets or the areas where it operates (physical climate risk).” With regard to climate change, BlackRock perceives the economy as ‘on the edge of a fundamental reshaping of finance’.

In a new report, BlackRock announced that it voted against management at 53 companies worldwide (primarily in the energy sector) for “lack of progress” on climate concerns during the 2020 proxy season, and directed another 191 companies to take faster action. Those that do not make significant progress risk BlackRock voting against management in 2021. The report contains case studies of circumstances where BlackRock voted against directors due to significant concerns about climate risk management (e.g., lack of robust disclosures on management of climate risks)."

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