In a sign that the height of shareholder engagement season is approaching, BlackRock Investment Stewardship has released its 2022 Engagement Priorities. The asset manager’s priorities are broadly the same as last year – which mapped to the UN Sustainable Development Goals – and signal a continued focus on board processes and accountability for long-term value creation.
The 10-page summary document identifies “Key Performance Indicators” for each of the main priorities. On top of the summary, BIS issued updated versions of its very detailed commentary on its engagement approach to:
1. Board Quality & Effectiveness – For companies with which BlackRock wishes to engage to understand the board’s role, it wants dialogue with a non-executive director. BlackRock assesses boards based on independence, tenure limits, time commitments, election cycles and diversity. BlackRock also wants companies to disclose their approach to ensuring meaningful board diversity and wants to see self-identified demographics on an aggregate basis, and understand how board composition aligns with the company’s strategy & business model.
2. Strategy, Purpose & Financial Resilience – BlackRock wants companies to set out how they’ve integrated business-relevant sustainability risks & opportunities. BIS encourages companies to disclose industry- or company-specific metrics to support their narrative on how they have considered key stakeholders’ interests in their business decision-making.
3. Incentives Aligned with Value Creation – BIS looks to companies to disclose incentives that are aligned with long-term value creation and sustained financial performance, underpinned by material and rigorous metrics that align with the company’s long-term strategic goals.
4. Climate Risk & Energy Transition – BlackRock encourages companies to discuss in their reporting how their business model is aligned to a scenario in which global warming is limited to well below 2°C, moving towards global net zero emissions by 2050. BIS encourages disclosures aligned with the four pillars of the TCFD—including scope 1 and 2 emissions, along with short-, medium-, and long-term science-based reduction targets, where available for the company’s sector. BlackRock won’t consider Scope 3 emissions disclosures & commitments “essential” for supporting directors.
5. Natural Capital – BlackRock wants info on how companies are managing material business risks & opportunities relating to natural resources such as air, water, land, minerals and forests.
6. Human Capital Management – BIS wants companies to provide info that shows how their approach to human capital management aligns with their stated strategy and business model, and to disclose actions they’re taking to support a diverse & engaged workforce.
7. Human Rights Impacts – BlackRock wants companies to discuss in their disclosures how the board oversees management’s approach to due diligence & remediation of adverse impacts to people arising from their business practices.
Each of these commentaries walks through BlackRock’s specific expectations and lists typical questions that they ask in engagement meetings. In total, the Investment Stewardship team published 53 pages of comprehensive guidance – on top of the 23-page voting guidelines and 20-page investment stewardship principles already issued. Hopefully that means that companies will be able to avoid any “gotchas” or surprises during engagements – and even more importantly, when it comes time to vote.
We’re posting this guidance in our “Shareholder Engagement” Practice Area along with other useful commentaries – so members can visit that library of info along with our collection of investor voting policies throughout proxy season.
– Liz Dunshee