Environmental issues like climate change “have real and quantifiable financial impacts,” Blackrock CEO Larry Fink said in a letter to business chiefs in May.
Fink praised shareholder activists, saying they often had better strategies for dealing with long-term risk than company boards.
Why then did the world’s biggest fund of its kind, with US$4.7 trillion of assets under management, side with ExxonMobil at its AGM against a proposal to do just that?
“It is real hypocrisy,” said Julian Poulter, CEO at non-profit the Asset Owners Disclosure Project. “There is no other word for it.”
AODP on Tuesday named and shamed the biggest Exxon investors blocking action to manage climate risk, including Vanguard, Bank of New York Mellon and JP Morgan.
It focuses on item 12, which asked the US oil major to “stress test” its business model against the international goal of holding global warming below 2C.
The logic is that more than two thirds of known fossil fuel reserves are unburnable if the world is to avoid dangerous climate impacts.
Companies that overspend on exploration could struggle to sell their wares as emissions cuts bite. Their financial backers would lose out. In the worst case scenario, the “carbon bubble” bursts, triggering a financial crisis.
Exxon’s board rejected this analysis, adamant that only fossil fuels could realistically meet growing world energy demand. Activists drummed up 38% support for their proposal – a respectable result for a contested vote, but not enough to force change.
Of the funds that endorsed the status quo, 45% were signatories to the Principles of Responsible Investment and 25% to the Carbon Disclosure Project.
They were trying to show clients they were serious about sustainability, said Poulter, but undermining it with their voting behaviour. “You can’t have your cake and eat it.”
A spokesperson for Blackrock said: “We prefer to engage with companies directly on complex issues such as adaptation to a low carbon economy. We have engaged extensively on a range of issues related to the themes of these shareholder proposals. Where a company is unresponsive, we hold board members accountable.”
Edward Mason, head of responsible investment at the Church Commissioners for England, which backed the climate resolution, noted that many of the institutions that voted against extra climate risk reporting at Exxon were in favour at BP and Shell.
“We hope that the size of this year’s vote will encourage these investors to adopt a consistent approach to voting on climate risk disclosure in the future. Their clients should demand nothing less,” he said.
“In the wake of the Paris Agreement, proper climate related financial disclosure is a pre-requisite for successful investment management.”
AODP also found a “crisis of accountability”. Pension holders petitioned more than 1,000 pension funds ahead of the Exxon AGM, urging them to align their retirement pots with climate goals. Only 35 responded, of which 23 declined to reveal their voting intentions.
It was partly a question of time: the campaign letters were sent three weeks ahead of the AGM. But AODP argued pension fund members were entitled to better information about where their money was going.
Colette St-Onge, digital campaigns officer at Share Action, which led the Vote Your Pension push, said: “Members engagement on issues like climate risk is an important tool to encourage responsible investing…
“These figures highlight how much work the industry as a whole needs to do to improve communications and accountability to members. Well-governed schemes are transparent about their voting and engagement activities; communicate their activities in a clear and accessible way; and actively solicit their members’ views.”
This article has been corrected. Blackrock has US$4.7 trillion of assets under management, not $4.7 billion as previously stated