• Can BlackRock deliver on its pledge to hold companies accountable on sustainability issues?
  • The $7 trillion asset manager is one of the biggest shareholders of most of the world’s listed businesses.
  • World’s largest asset manager has faced criticism about its commitment to sustainability.

BlackRock has talked the talk on sustainability, but the next few months will prove whether the $7 trillion fund manager can walk the walk.

The investment firm pledged in January to vote against management and board directors that weren’t making “sufficient progress” on sustainability issues. As a big shareholder in most of the world’s publicly traded companies, BlackRock can make a huge impact in fulfilling that pledge once proxy season kicks off in April.

BlackRock, the world’s largest asset manager, vowed to take on climate risk after Al Gore and other environmentalists criticized it for putting profit above all other concerns — and for its historic ties to the fossil-fuel industry, particularly Exxon Mobil. The shift in the fund manager’s focus also is a reaction to the increasing importance that potential investors are placing on environmental, social and governance principles. U.S. funds focused on sustainability attracted a record $20.6 billion of new assets in 2019, according to Morningstar. 

The proxy-season test puts BlackRock’s investment-stewardship team front and center. The group consists of 47 people, each of whom is responsible for up to 500 companies, according to Bloomberg. The sheer volume and size of BlackRock’s portfolio can make it difficult to thoroughly examine what each company is doing to mitigate climate risk, the report said, citing interviews with five current and former members of the team.

“BlackRock owes proper stewardship on each and every portfolio holding to its clients,” Wolfgang Kuhn, a former Aberdeen Standard Investments fund manager who now works for responsible investment campaign group ShareAction, told Bloomberg. “It’s doubtful that 50 people can cope with that.”

Vanguard Group, BlackRock’s closest rival, has a stewardship team of 35 people, while State Street Global Advisors has 12, Legal & General Investment Management has 16 and JPMorgan Asset Management has eight, Bloomberg reported.

The BlackRock team engaged with 1,458 companies in the year through June 2019, according to Bloomberg. That typically means that a BlackRock representative had a private chat with a portfolio member on something material to its outlook. The figure compared with 868 engagements at Vanguard, the report said.

“We believe that sustainability should be our new standard for investing,” BlackRock CEO Larry Fink wrote in a letter to clients in January. Now the question becomes how closely the company can adhere to that standard.

Photo by Eugene Gologursky/Getty Images for IRC