BlackRock’s push for environmental, social, and governance (ESG) in corporate boardrooms is starting to falter due to popular opposition against it nationwide.
Supporters of ESG have been pressuring corporations to incorporate climate change-related and progressive ideology into investment decisions.
For the first time, the world’s largest asset management fund voted down the majority of ESG proposals for the 2022–23 proxy season, according to its 2023 Investment Stewardship report, published on Aug. 23.
Quite noticeably, the term ESG only appears in the footnotes of the latest stewardship report, in contrast to last year when it was mentioned about two dozen times.
The ESG movement has been spearheaded in recent years by financial institutions such as BlackRock, Vanguard, and State Street.
Fink Blinks After Anti-ESG Backlash
As ESG comes under heavy partisan attack, an increasing number of major corporate leaders have started to gradually pull their support from overly politicized shareholder proposals.
Mr. Fink recently indicated that he too was backing away from his previous enthusiastic support for ESG, as it has increasingly become a politicized subject.
The Blackrock CEO told Fox Business that the term ESG had been “weaponized by the far left and weaponized by the far right. And we lose the conversation,” adding, “I don’t say [it] anymore.”
However, in a separate July interview with Axios, Mr. Fink reportedly claimed he was not “ashamed” when asked about his remarks on Fox.
“I never said I was ashamed,” he said. “I’m not ashamed. I do believe in conscientious capitalism.”
BlackRock’s waning support for ESG proposals is being seen as a positive sign for conservative activists and may reflect a broader shift in the industry.
Support for ESG Tumbles at BlackRock
Support for ESG proposals fell 9 percent this year from 2022, when the asset manager supported 24 percent of such shareholder proposals, and from 2021, when backing was a high as 43 percent.Meanwhile, BlackRock’s investment stewardship team only backed 7 percent of resolutions on climate and the environment and social considerations.
The trillion-dollar asset manager turned down 91 percent, or 742, out of the 813 proposals it voted on and 373, or 93 percent of the social and climate proposals it faced.
At the same time, the firm’s support for management proposals, which accounted for more than 99 percent of the roughly 172,000 proposals voted on by its investment team, remained high at 88 percent.
ESG shareholder proposals saw more than a 30 percent increase in the past year, but BlackRock admitted that many were too overly prescriptive or addressed actions that companies were already taking.
There was a year-over-year 34 percent uptick of environmental and social proposals after the firm saw a 130 percent surge last year, according to the report.
A record number of low-quality shareholder proposals during the latest proxy voting season—from July 1, 2022, to June 30, 2023—were put forward, especially those related to environmental and social issues.
The firm admitted that since “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.”
“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.
“Importantly, the majority of these proposals failed to recognize that companies are already meeting their asks.”
SEC Pushing Asset Manager Funds to Encourage Woke Proposals
BlackRock blamed the high number of low-quality shareholder proposals over the past year on increasing pressure from the Biden administration since November 2021.Although the private sector may be having second thoughts, the White House has been pushing regulations in favor of ESG.
In March 2022, for example, SEC Chairman Gary Gensler announced new rules requiring publicly listed companies to disclose climate-related information, which Republicans and business industry leaders have called unconstitutional.
The Department of Labor in late July began enforcing a rule that allowed retirement plan managers to factor ESG standards regarding the environment into investment decisions.
The SEC under Mr. Gensler broadened the range of permissible proposals to include those that address “significant social policy issues,” saying it would “provide greater clarity.”
His Republican colleagues at the SEC and critics on Capitol Hill blamed his move for creating more confusion.
The report said that Mr. Gensler’s rules effectively encouraged more shareholder proposals, including those of poor quality, to appear for a vote, even if they failed to “identify an issue associated with a material risk that could undermine a company’s ability to deliver durable financial returns.”
Conservatives Fight Back Against Activist Policies
Republican politicians and officials nationwide have been reviewing BlackRock’s business dealings and have been pressuring state pension funds to divest from the firm for unfairly targeting the energy sector to push a green agenda and for promoting woke workplace policies.This year, at least 165 pieces of anti-ESG legislation have been introduced across the country, including 19 bills which were passed in states including Texas, Missouri, Alabama, and Florida, according to a recent report.
“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,” Montana Attorney General Austin Knudsen told Fox News in March.
“Pushing it through these asset managers and through these proxy votes is extremely concerning.”
A coalition of 21 state attorneys general led by Mr. Knudsen at the time wrote to 53 of major financial institutions, including BlackRock, warning them against pursuing any woke initiatives in their states.
“The message is: ‘Stay in your lane and do what you’re supposed to do. You have a fiduciary obligation under our various states laws to maximize investment. That’s your job. That’s what you’re supposed to be doing. We’re aware of state law and if it needs be, we will defend our state pensioners against anything outside that lane,’” Mr. Knudsen said.
House Republicans are also pushing their own legislation after accusing ESG supporters of prioritizing social justice agenda over the financial interests of their shareholders and customers.
On the left, radical global warming activists have attacked Mr. Fink and BlackRock for not doing enough to stop climate change, even protesting outside its headquarters and heckling senior executives at public engagements.
