Asset Managers like BlackRock Control Trillions in Capital
How they vote on climate this spring could lead the business world
This January, CEO Larry Fink said he will put climate change at the center of BlackRock’s investment strategy, including increasingly using its shareholder power to vote off the boards of companies that are not making enough progress on climate and for initiatives that further sustainability goals. In March, BlackRock reemphasized that it will stand by its climate commitments during the COVID-19 pandemic. State Street also put corporations on notice that it will vote against company directors that are failing to make adequate progress on climate change.
The 2020 shareholder season will be a critical test of these commitments and of how the “Big Three” asset managers––BlackRock, Vanguard, and State Street––plan to use their outsized shareholder voting power to lead the business world toward action on climate change.
This Shareholder season is the first real test of BlackRock’s (and State Streets) recent climate commitments. In January, BlackRock said that it will put climate at the center if its investment strategy and Fink has claimed that he and BlackRack are “fundamentally reshaping finance to deal with climate change.” BlackRock has recently doubled down by assuring press that it will stick to its climate voting commitments in the midst of the Covid-19 pandemic.
What’s an asset manager?
Asset managers pool the investments of individuals, corporations and governments and buy shares of all kinds of corporations. The three largest asset management firms- BlackRock, Vanguard, and State Street - own a disproportionate share of companies engaged in climate disruption.
What do these asset managers have to do with us? Much of the money asset managers invest is actually public money -- i.e. taxpayer dollars. These taxpayer dollars are in the form of public pensions and other public investment funds. That gives us the right to demand that these asset managers invest in ways that protect our climate.
Voting for Climate
BlackRock, Vanguard, and State Street collectively vote about 25% of shares at S&P 500 companies. Last year these three asset managers used that considerable voting power to back 99% of oil and gas and electric power company directors across the S&P 500, despite woefully inadequate action across those sectors to combat climate change. This year the world is waiting for asset managers to make good on big promises.
The seriousness of BlackRocks’ and State Street’s commitments will be put to the test on a range of key shareholder votes this season. While there are many important shareholder meetings to watch this season, votes at three key companies - Duke Energy, JPMorgan Chase, and ExxonMobil - will provide a clear litmus test for whether they will walk their talk this season, and if Vanguard will follow their lead.
3 Key Climate Voting Opportunities, Spring 2020
Duke Energy: Shareholder Meeting, May 7, 2020
Duke Energy is the largest and highest-emitting publicly traded electric utility in the U.S.
Decarbonizing electricity is the linchpin to getting to net-zero emissions. According to Influence Map, Duke is a leading opponent of Paris-aligned climate policies and Duke is known to have supported multiple groups seeking to undermine clean energy policy.
Despite Duke’s public commitment to achieve net-zero emissions by 2050, it plans to keep the majority of its coal capacity online past 2030, and it has largely replaced the coal it has retired with new carbon-emitting gas infrastructure.
Instead of fully embracing renewables, the company plans to bring on 14,988 MW more in gas capacity from 2020 to 2034, locking in tens of millions of metric tons of CO2. Duke’s CEO and chair are currently the same person, and the lead independent director has been there for 29 years.
There are three critical climate votes at Duke’s shareholder meeting:
Asset Managers must vote to:
SUPPORT - a resolution filed by New York City’s head pension official to establish an independent chair of the board, a critical governance reform to hold management accountable to decarbonize.
SUPPORT - two resolutions demanding that Duke be more transparent with its political and lobbying expenditures. These same resolutions were up for a vote last year and would have received majority support – but for BlackRock and Vanguard’s “no” votes.
JP Morgan Chase Shareholder Meeting likely mid-May, date TBD
JPMorgan’s expansion of fossil fuel financing is at odds with both the global transformation needed and with its own financial analysts, who implicitly condemned the bank’s own investment strategy and warned that the climate crisis threatens the survival of humanity in a leaked report.
Lee Raymond was the architect of ExxonMobil’s notorious climate denial strategy. After 33 years of service, Raymond wields outsized power on JPMorgan’s board, and he is uniquely unqualified to hold CEO and Chair Jamie Dimon accountable on climate risks. As a former JPMorgan Chase managing director put it: “how he is not on trial for crimes against humanity is beyond me.” More details on Lee Raymond’s career of climate denial can be found here.
There are four key votes up at JPMorgan this season that will significantly shape its trajectory on climate.
Asset managers must vote to:
OPPOSE - the re-election of Lead Independent Director Lee Raymond, former CEO/Chair of ExxonMobil.
SUPPORT - two Climate critical shareholder resolutions calling on the company to report on whether and how it plans to align its portfolio activity with the goals of the Paris Agreement, and how the company is managing the risks of its most harmful fossil fuel financing.
SUPPORT - Resolution calling on JPMorgan Chase to establish an independent chair of the board, a measure investors have advanced multiple years since 2012 to put an essential check on CEO Jamie Dimon.
ExxonMobil Shareholder Meeting likely mid-May, date TBD
Votes in the oil and gas sector will be critical this season, nowhere more so than at ExxonMobil. When it comes to climate responsibility, ExxonMobil lags far behind even investor expectations and its international.
ExxonMobil’s ongoing failures led two investors, the New York State Common Retirement Fund and the Church of England, to commit to voting against all ExxonMobil board members over their inaction on climate change. Anything short of voting out current leadership will constitute an endorsement of the oil major’s recalcitrance and irresponsible governance. Both the independent chair proposal and lobbying disclosure resolution would have received majority support last year, had BlackRock and Vanguard voted for them.
Asset Managers must vote to:
OPPOSE - reelection of all ExxonMobil’s directors
SUPPORT - an independent chair proposal, which would introduce some accountability into ExxonMobil’s governance structure
SUPPORT - a lobbying disclosure resolution
Other Shareholder Meetings to Watch
These key votes are just some of the most important ones to watch this shareholder season. In the coming weeks Majority Action will release their full list of votes with resources and analysis for investors, reporters, and activists to help track the most critical shareholder season on record.
With BlackRock and other top asset managers finally acknowledging the systemic nature of the climate crisis and their responsibility to act, this shareholder season will reveal whether or not their climate commitments are real––or just more empty rhetoric.
Ready to take action? Call Asset Managers BlackRock, Vanguard and StateStreet now to tell them they need to vote for the climate this shareholder season.