In a remarkable turn of events, BlackRock, the world’s largest asset manager, has rejected the lion’s share of shareholder proposals pertaining to climate change and social issues during the 2022-2023 proxy voting season, according to a company statement released on Wednesday. The trillion-dollar asset management titan dismissed 742 of the 813 proposals it voted on, including a whopping 93% of the social and climate-related propositions it encountered, as revealed in its 2023 Investment Stewardship report shared with FOX Business.
The surge in rejected proposals is largely attributed to an increase in low-quality shareholder proposals, a trend BlackRock attributes to federal guidance issued by the Biden administration in 2021. Joud Abdel Majeid, BlackRock’s global head of investment stewardship, noted in the report that many of these proposals were either overly prescriptive or lacked economic merit, with a majority failing to acknowledge existing efforts by companies to meet their demands. The company’s stance reflects a broader debate over the role of asset managers in addressing environmental and social issues, amid a nationwide push against the environmental, social and governance (ESG) movement.
BlackRock Rejects Majority of Climate and Social Proposals in Proxy Voting Season
BlackRock, the world-leading asset manager, has reportedly voted against the lion’s share of shareholder proposals pertaining to climate and social matters during the 2022-2023 proxy voting season. According to the 2023 Investment Stewardship report released Wednesday, BlackRock rejected 742 out of 813 proposals it voted on, including 93% of the social and climate proposals it faced.
Escalating Number of Low-Quality Proposals
The trillion-dollar asset manager attributed its stance to an increase in low-quality shareholder proposals, which it suggests are due to federal guidance issued by the Biden administration in 2021. "We observed a greater number of overly prescriptive proposals or ones lacking economic merit," wrote Joud Abdel Majeid, BlackRock’s global head of investment stewardship, adding that many proposals failed to acknowledge companies’ existing commitments.
Shareholder Proposals Reach Record High
BlackRock’s report highlighted an unprecedented number of shareholder proposals, particularly those addressing environmental and social concerns, during the proxy voting season. The company reported a 34% year-over-year uptick in environmental and social votes, following a 130% surge in such proposals the previous year.
The increase in proposals is largely attributed to guidance issued by the Securities and Exchange Commission (SEC) in November 2021, which expanded the range of permissible proposals to address "significant social policy issues." While SEC Chairman Gary Gensler viewed the guidance as providing "greater clarity," Republican SEC members and lawmakers criticized it for creating more confusion.
Quality Over Quantity
According to BlackRock, this change has led to an influx of lower quality proposals appearing on company ballots. Many proposals, the company noted, failed to identify a material risk that could undermine a company’s ability to deliver durable financial returns. For instance, BlackRock rejected a proposal requiring Amazon to reveal more about the sustainability of its packaging, as Amazon had already planned to disclose this information.
The ESG Controversy
The report’s release comes amidst a nationwide pushback against the environmental, social, and governance (ESG) movement, largely driven by BlackRock and other financial institutions. Critics, primarily Republican states and GOP lawmakers, argue ESG policies unduly prioritize social agendas over American financial interests.
Montana Attorney General Austin Knudsen, who led a coalition of 21 state attorneys general warning large financial institutions like BlackRock against pursuing "woke initiatives," stated, "This ESG nonsense is filtering into a lot of our states and the way they’re doing it is really, really concerning and probably flagrantly illegal."
While BlackRock’s stance may appear to contradict the wider trend towards ESG, it seems to underscore a focus on the quality and economic viability of proposals rather than their number. This approach, while criticized by some, may serve as a reminder of the need for balance between social priorities and financial interests, potentially setting a precedent for other asset managers to follow.