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US investors secure climate risk commitment from BlackRock

US responsible investment investors have secured a greater commitment from asset management giant BlackRock that it will be engaging with its investee companies on climate risk. The group hopes that this could also mean BlackRock supports some climate change shareholder resolutions during the 2017 proxy voting season.

Walden Asset Management, the Center for Community Change, the City of Seattle Employees’ Retirement System and First Affirmative Financial Network filed a shareholder resolution requesting a review of BlackRock’s proxy voting process and record on climate change. However, they withdrew the resolution after BlackRock engaged with them. As a result of the dialogue, BlackRock has provided more information on the ways it believes climate change creates risks and opportunities for companies.

BlackRock said that climate risk would be one of the key engagement themes that its investment stewardship team would prioritise in 2017.  The team’s recent work on this issue and its engagement and contributions to initiatives such as the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) would inform its assessment of shareholder proposals on the topic, BlackRock added.

Over the course of 2017, BlackRock intends to engage with companies most exposed to climate risk to understand their views on the recommendations from the TCFD and to encourage such companies to consider reporting against those recommendations in due course.

BlackRock climate change

Tim Smith at Walden Asset Management supports BlackRock’s approach on climate change

Tim Smith, director of ESG shareowner engagement at Walden Asset Management said:  “BlackRock’s announcement that climate risk will be a priority in their engagements with public companies is an exceedingly important message being sent by the world’s largest investment manager. Hearing directly from one of your largest shareholders that they believe climate risk is a priority reinforces the importance of the issue for senior management of public companies.”

Smith added: “We are hopeful that BlackRock’s announcement and its engagement on climate risk will also result in active support for shareholder resolutions on climate change going forward.

In recent years BlackRock said it had worked to enhance its understanding of climate change and believe that it presents significant investment risks and opportunities that have the potential to impact the long-term shareholder value of many companies. Last September the BlackRock Investment Institute published a paper which indicated that investors should be incorporating climate change awareness into their investment processes.

Additionally, in his annual letters to company chief executives (CEOs) in 2016 and 2017 Larry Fink, BlackRock’s CEO has also emphasised that environmental, social, and governance factors relevant to a company’s business could provide essential insights into management effectiveness and thus a company’s long-term prospects.

What do you think?