September 22, 2021

ESG: The Mega Asset Managers Crack the Whip

According to a recent CFO Dive article, everybody’s largest shareholder is running out of patience with the pace of ESG disclosures. Here’s an excerpt:

BlackRock, the world’s largest asset manager, is losing patience with companies that are slow to disclose the details of their adherence to environmental, social and governance (ESG) principles, according to Jessica McDougall, a director for investment stewardship at BlackRock. “We don’t have patience much longer for these disclosures to be forthcoming,” McDougall said Tuesday in a webcast sponsored by Diligent, adding “we are increasingly seeing the impacts of climate change not only across our portfolios but also across the global economy.”

BlackRock, which manages $9 trillion in assets, has pressed for more disclosure in recent years, “but this was the year that we really started to take more concerted action based on what companies were providing us” before the 2021 proxy season, McDougall said. “Where we felt that companies were falling short for a variety of ESG issues, we were more inclined to support those [shareholder] proposals this year.”

Value Edge Advisors blogged that, during this same webcast, T. Rowe Price’s head of corporate governance said that the big asset managers are feeling the heat from their own clients, regulators & the media, so they’re ratcheting up the pressure on their portfolio companies. Specifically, they’re looking for inconsistencies between those companies’ stated ESG priorities and their political advocacy:

Large asset managers are feeling acute pressure on ESG from clients, the press and regulators, explained Donna Anderson, vice president and head of corporate governance at T. Rowe Price. She said the fund firm is developing analytical and tracking tools to help portfolio managers and stewardship teams identify gaps between companies’ stated ESG priorities that are undermined or canceled out by political spending or membership in trade associations that lobby state and federal legislators for regulations contrary to companies’ official positions.

“If you’re doing business as usual but your [corporate social responsibility] departments are generating tons of reports, assertively staking claim to these various goals, but they’re not being operationalized, it’s going to become evident,” said Anderson during the event. “That’s a real problem in our view.”

According to BlackRock’s recent Stewardship Report, its support for shareholder proposals doubled this year from 17% to 34%, and it voted against 10% of incumbent directors this year, up from 8.5% last year. These recent comments suggest that there’s more bludgeoning to come from the mega asset managers if companies don’t get religion when it comes to both ESG disclosure & operationalizing their stated ESG priorities.

John Jenkins