March 18, 2020 / 10:10 AM / 13 days ago

BlackRock stands by climate priorities, sees tougher shareholder votes

BOSTON/LONDON (Reuters) - BlackRock Inc executives who set the asset manager’s influential proxy votes on Tuesday outlined tougher priorities tied to climate change and executive pay for the upcoming corporate annual meeting season taking place amid the coronavirus pandemic.

FILE PHOTO: A sign for BlackRock Inc hangs above its building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson/File Photo

The comments fleshed out details about how the $7 trillion asset manager would cast its shareholder votes at a time of economic uncertainty. BlackRock Chief Executive Larry Fink laid out a more forceful approach in January after criticism from investors.

Michelle Edkins, BlackRock’s (BLK.N) global head of investment stewardship, said in an interview on Tuesday that the pandemic is consuming corporate attention but indicated that BlackRock will not cut company directors slack as it decides whether to back their re-election.

BlackRock will continue to judge whether boards have made progress against goals BlackRock has touted for several years such as those tied to climate issues, Edkins said. This year, she said, “We’re being much more direct.”

Absent progress the company expects it will vote against more directors, she said. In previous years it has supported directors about 97% of the time at Russell 3000 companies, according to Proxy Insight.

Edkins also said the pandemic could help sort out which companies have kept a long-term focus and have strong human capital management and business continuity plans.

“The concept of long-term sustainability would suggest that companies that come through this crisis and do well would be exactly the kinds of companies you would look to as role models,” she said.

BlackRock’s comments come as investors weigh what impact the coronavirus will have on efforts to slow climate change.

Among other things, BlackRock this year will look for executive pay to correlate with long-term performance metrics such as companies’ total shareholder returns over three or five years, according to a fact sheet provided by the company.

A Reuters analysis last year found a pattern of deference to managers by BlackRock and other top index fund managers, even at poor-performing companies as measured by three-year returns through the end of 2018.

BlackRock also will ask companies to give details recommended by the Task Force on Climate-Related Financial Disclosures and the Sustainability Accounting Standards Board, and threatened to vote against non-executive directors in cases where there are not adequate disclosures.

BlackRock said it will explain more specific votes, such as why it opposed executive pay at chipmaker Qualcomm Inc (QCOM.O). BlackRock published seven such explanations in 2017, but just two the next year and one in 2019.

Now, said BlackRock Vice Chairman Barbara Novick, “We’re trying to enhance the quantity and quality of communications.”

In another example cited by a BlackRock spokesman on Wednesday, the company said in a note on its website that it voted against the chair of the audit committee of energy provider National Fuel Gas Co. (NFG.N) at its annual meeting on March 11 for lagging reporting on climate matters.

Because the Williamsville, New York-based company faces risks including the need to set emission reduction targets and potentially decreased demand for its products, “we would have expected the company to be farther along in its reporting,” BlackRock’s note said.

National Fuel spokesperson Karen Merkel said via email that the company appreciates shareholder feedback and it has enhanced sustainability disclosures.

“National Fuel is focused on this important topic, with an eye toward continued improvement in the years ahead,” Merkel said.

Reporting by Ross Kerber in Boston and Simon Jessop in London; Editing by Leslie Adler and Sonya Hepinstall

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