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Environmental shareholder proposals are becoming increasingly more prescriptive, resulting in them facing heightened opposition at shareholder meetings, according to a BlackRock whitepaper published Tuesday.
In the whitepaper, BlackRock noted that many more ESG shareholder proposals are going forward to a vote at U.S.-listed companies, largely in part to the Securities and Exchange Commission (SEC) taking a more ESG-friendly stance when assessing Rule 14a-8 no-action letters.
Despite this, the world’s largest fund manager said that it is unlikely to support proposals that intend to “micromanage” companies in regards to their climate efforts.
“This includes [proposals] that are unduly prescriptive and constraining on the decision-making of the board or management, call for changes to a company’s strategy or business model, or address matters that are not material to how a company delivers long-term shareholder value,” BlackRock said.
Institutional Shareholder Services (ISS) and Glass Lewis have also noticed that environmental shareholder proposals are becoming increasingly prescriptive, BlackRock said, with both proxy advisers recommending against more environmental proposals this proxy season compared to previous seasons.
Glass Lewis has endorsed 41.2% of environmental shareholder proposals subject to a vote at U.S.-listed companies so far this year, compared to 33.4% and 44.3% throughout 2020 and 2021, respectively, according to Insightia’s Voting module.
BlackRock went on to suggest that Russia’s invasion of Ukraine may result in reduced support for environmental shareholder proposals, as companies are forced to balance their decarbonization efforts with addressing the global demand for energy.
“Net exporters of energy are likely to be required to increase production, while net importers are expected to accelerate efforts to increase the proportion of renewables in their energy mix,” the whitepaper reads. “This set of dynamics will — at least in the short- and medium-term — drive a need for companies that invest in both traditional and renewable sources of energy.”
Given these circumstances, BlackRock warned it is likely to support “proportionately fewer” environmental shareholder proposals this proxy season than in 2021, as many may not be “consistent with clients’ long-term financial interests.”
In 2021, BlackRock supported 47.4% of environmental proposals subject to a vote at U.S.-listed companies, compared to 17% in both 2019 and 2020, according to Insightia’s Voting module.
Looking forward, BlackRock will support environmental shareholder proposals that help investors understand “material” risks and opportunities a company faces. This may include proposals seeking disclosure of a company’s climate plan, quantitative Scope 1 and 2 emissions reduction targets, and emissions reduction targets.