Blackrock’s Strong Statement to Boards

Blackrock has made a strong statement to boards of portfolio companies: we expect you to act on climate change risk and gender diversity, and if you don’t, you may not be able to count on our vote.

In their recently published engagement priorities they cite board diversity, climate and social issues at the top of the list.

Board diversity:

“Over the coming year, we will engage companies to better understand their progress on improving gender balance in the boardroom. Diverse boards, including but not limited to diversity of expertise, experience, age, race and gender, make better decisions.  If there is no progress within a reasonable time frame, we will hold nominating and/or governance committees accountable for an apparent lack of commitment to board effectiveness.”

Climate change:

“For directors of companies in sectors that are significantly exposed to climate risk, BlackRock expects the whole board to have demonstrable fluency in how climate risk affects the business and management’s approach to adapting and mitigating the risk. We have the same expectation of boards wherever a company faces a material, business-specific risk. We would assess this both through corporate disclosures and direct engagement with independent board members, if necessary.”

Continuing the theme from recent years, Blackrock is one of many investors calling for better and more transparent disclosure of climate risks, the correlation to and impact upon strategy, and the process of risk mitigation and management. Direct engagement can be expected for companies about which BlackRock has concerns, potentially leading to negative voting on the re-election of directors deemed responsible for failure to address these concerns in a timely fashion.

Many climate- and sustainability-related proposals receive low single-digit support. Are we about to see many get a significant bump?