Stewardship team of major US asset manager says increased interaction is encouraging, but reporting frameworks remain confusing.
The Q3 2020 ‘BlackRock Investment Stewardship: Global Quarterly Stewardship Report’ has revealed a particular focus on social and governance issues by the world’s largest asset manager as companies continue to navigate pandemic-ravaged markets. Environmental risks and opportunities nevertheless remain a key topic of engagement.
“Enabling investors to better identify, assess, measure and monitor sustainability-related risks is crucial to our role as stewards for our clients’ capital,” the report said.
BlackRock Investment Stewardship (BIS) reported 559 total engagements with 490 companies across ESG issues, an increase of 21% over Q3 2019. Environmental and social logged a 238% and 246% year-on-year (yoy) increase in related meetings, with topics such as climate risk management, human capital management and operational sustainability. Governance saw a 17% yoy increase in comparison, from 438-related meetings in Q3 2019 to 512 in Q3 2020.
“We noticed that although management teams and boards are naturally spending a considerable amount of time, effort, and resources to respond to the Covid-19 pandemic and various social issues, they remain focused on long-term climate risks and opportunities and the transition to a low-carbon economy,” the report added.
Active voting has also increased. BIS voted against 37% of management recommendations in meetings (up from 34% in Q3 2019) and against 10% of management recommendations in proposals compared to 8% the previous year. BlackRock underlined its intentions to continue pushing this percentage upwards to encourage sustainable practices. However, BlackRock only voted against management in 15% of shareholder proposals on governance and none on environmental or social issues.
The report further revealed a 400% increase (403 companies) in use of Sustainability Accounting Standards Board (SASB) standards for sustainability reporting since January 2020 – 232 (58%) domiciled in US and 247 members of the S&P Global 1200 Index.
This is an upward trend BIS urges its client to continue, as “better quality reporting and data would support more accurate asset pricing and enhance understanding of the drivers of risk and value in companies’ business models as well as our ability to advocate for sound governance and business practices”.
BIS acknowledged that directors and leadership teams find various frameworks and standards remained confusing. “The lack of clarity is an obstacle to enhanced reporting,” the report said.
As a result, BlackRock is calling for a “convergence of the different private sector reporting frameworks and standards to establish a globally recognised and adopted approach to sustainability reporting”.
The report collated data across BlackRock’s Americas, Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) teams, offering a global perspective of the firm’s progress in stewardship, following Chairman and CEO Larry Fink’s pledge to put sustainability at the heart of BlackRock’s business decisions.