TheCorporateCounsel.net

Late last week – one day after Vanguard announced a pilot program for retail investors in certain index funds to have a greater say in proxy voting – BlackRock issued this update on its “Voting Choice” program that was launched last year and expanded this summer.

The update – which was accompanied by a letter to clients & corporate CEOs from BlackRock CEO Larry Fink – says that about 25% of eligible assets are participating. That’s consistent with the participation rate that I blogged about in June. Here’s what else is new:

1. Extension of the voting policies clients can choose from: Participating clients in global SMAs and eligible pooled vehicles can now select one of seven Glass Lewis proxy voting policies, including an upcoming global policy, the Glass Lewis Governance-Focused Policy. These options are in addition to seven Institutional Shareholder Services (ISS) policies that have been available since the launch of BlackRock Voting Choice on January 1, 2022. This broader array of policy choices enables clients to choose a policy that more closely aligns with their investment views and preferences.

2. An expansion of investment strategies eligible: In addition to certain institutional pooled funds tracking index equity strategies, certain institutional pooled funds that implement Systematic Active Equity (SAE) strategies are now also eligible for BlackRock Voting Choice. Rather than tracking an index, SAE investment strategies use a forecasting model and an optimization process to select stocks. The expansion of BlackRock Voting Choice to institutional pooled funds using these SAE investment strategies includes eligible clients representing $90 billion as of September 30, 2022, in assets under management in both pooled funds and previously eligible SMAs.

3. Aiming to enable investors in select UK mutual funds to exercise choice in the upcoming 2023 proxy voting season: BlackRock has agreed with Proxymity, a digital investor communications platform, to work together on building a solution that aims to offer pass-through technology to enable investors to exercise choice in how their portion of eligible shareholder votes are cast for the upcoming 2023 proxy voting season. BlackRock and Proxymity will share further details on the collaborative efforts in the coming months.

4. An update on continued client adoption; demonstrating desire for expanded proxy voting choices: Since May of this year, the number of index equity clients newly committed to BlackRock Voting Choice has more than doubled. Despite market volatility, newly committed index equity AUM has increased more than 30% in the past six months to $157 billion as of September 30, 2022, from $120 billion as of March 31, 2022. In total, including SAE, BlackRock equity clients have committed $472 billion as of September 30, 2022 – or a quarter of eligible assets ($1.8 trillion) – to voting their own preferences through BlackRock Voting Choice.

The jury is still out on what this shift in the direction of “pass-through voting” could mean for companies, other than making voting outcomes less predictable and investor influence more dispersed. Over time, we’ll get a better sense for whether this raises the importance of certain proxy advisor policies and whether it calms concerns that the world’s largest asset managers have too much sway.

– Liz Dunshee