Shareholder proposal by faith investors likely to attract substantial support.
The shareholder proposal on lobbying disclosure filed by faith-based investor the Unitarian Universalist Association will go to a vote later today at BlackRock’s AGM in New York, amid expectations that it will again garner substantial support.
A similar proposal, asking for enhanced discourse on lobbying with a focus on climate change, achieved 20% of the vote in 2018.
Tim Brennan, Treasurer and CFO of the UUA, told RI that there are two sticking points when it comes to BlackRock’s lobbying disclosure.
The first was that the world’s largest asset manager does not disclose all of their trade association memberships. The second was the amount spent on lobbying through them.
Brennan said that BlackRock fails to disclose membership in the US Chamber of Commerce.
“Something doesn’t fit: the Chamber of Commerce is, of course, one of the leading forces opposing climate policy, while BlackRock has very forward looking ones.”
Brennan said additional reputational risk comes from BlackRock’s membership of the US Business Roundtable, which advocates reducing shareholder rights such as filing proposals. “Shareholders would be interested in knowing that,” Brennan noted.
In mid-April, the UUA filed with the Securities and Exchange Commission an exempt solicitation urging shareholders to vote for the proposal (through exempt solicitations, or PX14A6G forms, investors can submit communications intended for other shareholders).
Proxy advisory firm ISS has recommended voting for the proposal on the grounds that incomplete disclosures can impair shareholders’ ability to evaluate risks and benefits associated with corporate lobbying.
BlackRock opposed the proposal because the board said the current disclosures offer the appropriate amount of detail. “A report beyond what has been published on our website and required public filings would impose administrative burdens on the company,” BlackRock told shareholders in the proxy statement.
The New York State Common Retirement Fund and the Florida State Board of Administration told RI they are again voting in favour of the proposal this year. The New York City Public Pension Funds pre-disclosed its vote for ahead of the AGM.
Based on last year’s results, other potential support could come from the California Public Employees’ Retirement System, the Illinois Funds, the Pennsylvania State Employees’ Retirement System, and the Teacher Retirement System of Texas.
The California State Teachers’ Retirement System, however, told RI that this year it has voted against the proposal.
In Europe, the proposal will be supported by the Church of England’s Pensions Board and by Sweden’s state pension fund AP7.
Both investors drafted an expectations document on corporate lobbying on climate change, which matches the UUA’s demands.
Signatories to this document in Europe are Legal & General Investment Management (LGIM), which supported the resolution last year. BNP Paribas Asset Management, also a signatory, did not want to reveal its vote ahead the AGM.
Additional support could come from Norges Bank Investment Management and Royal London Asset Management, if they were to repeat their previous vote.
Brenan added that BlackRock’s voting record as an investor is another reason to support the resolution, if CEO Larry Fink is serious about honoring the spirit of his annual letters. In 2018, BlackRock supported 23% of climate-related shareholder proposals compared to LGIM’s 81%, according to the 50/50 Climate Project.
“Another question is how the company is walking the talk. [The Fink letter] is a great statement but then the question is, what the company is actually doing at a granular level, like voting proxies and doing the kind of disclosure we are talking about here. Transparency should be part of this.”
Brennan admitted that with his 2018 letter, Fink “stuck his neck pretty far out”.
“I think he is still committed but remember, their business is managing 401(k) plans for huge corporations. If they are simultaneously voting against them, that can put them in an awkward spot.”
BlackRock will also face pressure outside the AGM from activists who have started to target investment firms for their fossil fuels holdings, such as BlackRock’s Big Problem. This was one of the organisations that inspired the Yes Men prankers, who penned the fake Larry Fink letter earlier this year.
by Carlos Tornero of Responsible Investor | May 23rd, 2019