BlackRock Gives Clients Greater Voting Choice Amid ESG Scrutiny
Bloomberg News
,(Bloomberg) -- BlackRock Inc. is expanding efforts to give clients invested in index funds the ability to vote their own shares on issues such as executive compensation and climate change.
The world’s largest asset manager, facing mounting scrutiny over environmental, social and governance matters, said Monday that it’s extending a voting program to more funds in the UK -- and to those in Canada and Ireland for the first time.
The firm, with $9.6 trillion in client assets as of March 31, is also beginning a test program for individual mutual fund investors in Britain to have greater power to vote, and said that it will ask lawmakers and regulators how this might be made possible for US retail investors.
“We understand that some clients are seeking increased customization, including the opportunity to align their voting with their unique investment philosophies or their views,” Sandy Boss, global head of BlackRock Investment Stewardship, said in a statement.
Since the program began in October, almost half of the firm’s $4.9 trillion in index equity assets have become eligible to participate, including those held by insurers and pensions in North America, Europe and the Middle East, according to the New York-based company. Clients with roughly a quarter of those $2.3 trillion in eligible assets -- or $530 billion -- so far have seized the opportunity to vote.
Under the program, institutional clients can control their own voting, choose to vote on only certain issues that matter to them, select from seven different voting policies or continue to rely on BlackRock’s stewardship office.
BlackRock’s power has grown over the past decade as it rode a wave of change in the asset-management industry, with clients shifting to low-cost funds linked to equity benchmarks. Each of the three biggest index-fund managers -- BlackRock, Vanguard Group and State Street Corp. -- is a top-five shareholder in most S&P 500 companies, giving the firms significant voting power at shareholder meetings.
Read more: Investors Crank Up Pressure With Record ESG Proxy Votes
That has prompted a backlash, especially among Republicans, that BlackRock has outsize sway over corporations and even on hot-button issues such as gun control and abortion rights that come up at meetings through shareholder resolutions.
Chief Executive Officer Larry Fink, 69, has become an increasingly prominent voice during the past decade, urging corporations to think about more than just profits. His annual letters on “stakeholder capitalism” have drawn criticism from conservatives who say he’s pandering to “woke” values.
Republicans in some energy-rich states have challenged the firm over its views on climate change, with Texas threatening to limit how much business it does with BlackRock. In Florida, the company has faced criticism for its dealings in China, and former Vice President Mike Pence said in a recent speech that large investment firms are pushing a “radical ESG agenda,” taking aim at BlackRock specifically.
On Tuesday, the US Senate Banking Committee is planning to hold a hearing on how index funds vote their shares. Republican Senators Dan Sullivan of Alaska and Pat Toomey of Pennsylvania, among others, have sponsored legislation seeking to curtail the voting power of large asset managers.
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