BlackRock Adopts New Voting Policy for Funds That Take Climate Change Goals Into Account

BlackRock is rolling out new guidelines that would allow clients with climate-focused goals to vote differently from others on shareholder proposals — the latest move by the asset manager to navigate a political divide over ESG investing.

In an email to clients, BlackRock said the new guidelines would take into account companies’ efforts to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels, a goal set out in the Paris Accords.

However, the guidelines only apply to funds with climate and decarbonization goals, the majority of which are currently based in Europe. Eighty-three funds in the region, valued at $150 billion in assets under management, have been approved to apply the guidelines, which will come into effect in the fourth quarter of 2024. Funds with climate-related goals in the Americas and Asia are expected to adopt the guidelines in the second half of 2024, but are subject to board approval.

The new policy comes as the asset manager faces an uphill battle over whether to factor environmental, social and governance factors into its investment decisions. Republicans have railed against the firm’s consideration of sustainability, as well as that of other asset managers, arguing that it puts climate change ahead of generating the highest returns for clients. Climate activists, on the other hand, have also criticized the firm for investing in fossil fuel companies.

The email also mentioned that clients who invest through separately managed accounts can apply the guidelines to their funds.

“The guidelines are only being implemented for funds with climate and decarbonization objectives, upon approval by the relevant fund’s board of directors or upon explicit instruction from clients in separately managed accounts,” Joud Abdel Majeid, global head of investment management, wrote in an email to clients. “For all other funds, BlackRock will continue to fulfill its stewardship responsibilities with a sole focus on enhancing clients’ long-term financial returns, consistent with our benchmark policies.”

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Climate-focused funds may take opposing positions to the rest of the group on climate-related shareholder resolutions, but will otherwise adhere to the firm’s core ESG guidelines. The new guidelines, however, explicitly state that they will not support proposals that seek to restrict “board or management decision-making or direct specific business or strategic decisions.” This includes proposals that would require commitments or actions related to climate risk or the transition to a low-carbon economy.

BlackRock CEO Larry Fink was initially a vocal advocate for ESG investing but has scaled back his efforts after coming under attack from Republicans who called it “woke capitalism.” Last year, Fink said he had stopped using the term ESG because it had become too politicized.