BlackRock, the world’s leading money manager, has eased its support for shareholder proposals emphasizing environmental, social, and governance (ESG) factors.
The change of heart comes at a crucial juncture, with the verdict on BlackRock’s Bitcoin exchange-traded fund (ETF) application just around the corner.
BlackRock’s Decline in Support for ESG Proposals
Historically a staunch promoter of ESG investing, BlackRock’s recent annual report paints a contrasting picture. Indeed, the firm endorsed only 7% of approximately 400 shareholder proposals related to environmental and social issues.
This represents a sharp decline from 25% in the last cycle to 47% in the preceding.
“Because so many proposals were over-reaching, lacking economic merit or simply redundant, they were unlikely to help promote long-term shareholder value and received less support from shareholders, including BlackRock, than in years past,” the company’s report indicated.
BlackRock’s engagement with ESG has brought it under the Grand Old Party’s (GOP) radar, with the party challenging the company’s approach.
Moreover, GOP presidential contender Vivek Ramaswamy criticized BlackRock for prioritizing ESG over conventional profit-driven criteria. Ramaswamy’s vocal critique, coupled with reports like the “2023 Global Voting Spotlight,” intensifies the debate around ESG, urging a re-evaluation of the balance between profit and sustainability.
Intriguingly, BlackRock CEO Larry Fink’s annual letter this year noticeably sidestepped ESG, contrasting with his previous letters.
“More than half of the companies in the S&P 500 now voluntarily report Scope 1 and Scope 2 emissions. I expect that number will continue to rise. But as I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police,” Fink said.
Tight Links With China in the Spotlight
Furthermore, BlackRock’s increasing connections with China have not gone unnoticed. The House Select Committee on the Chinese Communist Party recently announced its intent to investigate BlackRock alongside index provider MSCI.
“Our initial review — which did not even cover one of the USG’s largest blacklists, the US Department of Commerce’s Entity List—revealed that BlackRock facilitates investment into dozens of blacklisted companies. The true scale is likely much larger,” reads the letter.
Amid these controversies, BlackRock’s executives highlighted a pilot program to underline their commitment to shareholder value. This program would give individual investors a say in how their share of BlackRock’s most significant ETF votes on owned companies.
“This plan — subject to approval by the board that governs our ETFs — would let millions of these individual investors select from different policies to decide how their share of the ETF will vote on the companies they own,” the executives wrote,” reads the op-ed.
As the world’s largest asset manager, BlackRock’s position on any subject carries weight. The reduced endorsement of ESG policies mirrors the evolving investment environment, reflecting the ongoing struggle between profit and sustainability.
As BlackRock anticipates a ruling on its Bitcoin ETF application, questions arise. Is the company seeking to reposition itself as a purely profit-driven firm? Or is this only a phase in its ongoing commitment to harmonize profitability with sustainability?