BlackRock puts energy majors Woodside, Santos on notice over climate

BlackRock has stepped up its discussions with companies it invests in over the past 12 months over “climate related” issues.

US fund giant BlackRock is backing moves for shareholders to have more say in their company’s climate change policy, indicating that it is closely watching events at Woodside, Santos and Rio Tinto, in its annual shareholder voting report released today.

The fund giant, which warns that it is prepared to vote against the management of companies which it feels are not doing enough to cope with the risks of climate change, has also indicated that it continues to follow developments at Rio closely in the wake of last year’s destruction of a 46,000-year-old Aboriginal sacred site at Juukan Gorge in Western Australia.

Commenting in its latest Investment Stewardship Voting Spotlight Report, covering the financial year to the end of June 2021, BlackRock says it welcomes the appointment of former Western Australian treasurer and Aboriginal affairs minister to the Rio board, as its first Aboriginal member director.

“We will continue to engage with the company as it seeks to rebuild stakeholder trust (over the Juukan Gorge issue),” it says.

The report indicates that BlackRock may well have voted in support of shareholder proposals at Woodside, Santos and Rio Tinto, put to their last annual general meetings, for the companies to detail their plans to respond to climate change.

The resolutions were withdrawn following promises by the companies’ management to put up climate change plans for consideration at their next AGMs.

“In Australia, at Woodside Petroleum, Santos Limited and Rio Tinto, (shareholder) proposals (to vote on the company’s climate action plans) were ultimately withdrawn from the agenda ahead of the annual meeting after the companies agreed to put their climate plans to a vote themselves in future,” BlackRock says.

“This reflects both the heightened focus that shareholders have on a company’s approach to the transition to a low-carbon economy, as well as companies’ understanding of the importance of this issue for shareholders. BlackRock believes that these type of proposals have merit in many of the companies at which they were filed.”

The report notes that proposals to allow shareholders to have a vote on a company’s plans to respond to climate change are becoming a growing feature of annual meetings for companies around the world.

The fund said it supported 26 “say on climate” proposals put to AGMs in 23 companies it invests in around the world, most of which were put forward by the companies themselves.

The report argues for more third party research to be done to help investors in assessing companies’ “climate action” plans.

“BlackRock will continue to monitor the development of ‘say on climate proposals’ and we welcome ongoing progress regarding corporate climate change policies, ambitions and targets to manage climate risk,” it says.

The fund says it has stepped up its discussions with companies it invests in over the past 12 months over “climate related” issues, warning that it is prepared to vote against management if it felt it is not doing enough to address the risks.

BlackRock expanded its climate focus universe of carbon intensive companies to 1000. It voted against 255 directors and against 319 companies for climate-related concerns that could negatively affect long-term shareholder value.

It says it has communicated (to these companies) the fund’s position that “we expect companies to demonstrate how climate and sustainability related risks are considered and integrated into their strategy”.

“If a company does not provide adequate public disclosures for us to assess how material risks are addressed, we may conclude that those issues are not appropriately managed and mitigated. This perspective has applied to our voting on management and shareholder proposals since July 1, 2020.”

The report includes a special mention of Rio Tinto’s destruction of the Aboriginal sacred sites at Juukan Gorge, which led to the departure of chief executive Jean-Sebastian Jacques and other senior executives.

It says BlackRock had “engaged extensively with members of the board and management to address the issue.”

It said it had voted against the remuneration report at the last AGM as it felt that their exit package “did not adequately reflect the severity of the destruction of the gorge and the resulting damage to the environment, relevant communities and the company’s social license to operate.”

The report said BlackRock welcomed the appointment of Mr Wyatt as a director and “will continue to engage with the company as it seeks to rebuild stakeholder trust” over the issue.

BlackRock said it had voted on more than 165,000 proposals put to the annual meetings of the companies it invests in over the period covering 71 voting markets.

It has voted against management in one or more proposals at 42 per cent of shareholder meetings – up from 39 per cent the previous year.

It has also shown an increasing interest in voting in favour of shareholder proposals, supporting 35 per cent of shareholder proposals in the most recent period compared with 17 per cent the previous year.

It says key reasons to vote against directors were a lack of independence, a lack of board diversity, concerns about executive compensation and overcommitments of directors.

BlackRock has a team of 70 specialists in “stewardship” engaging with the thousands of companies it invests in as part of its approach of “pursing long term value” for its clients.

It says the main areas of engagement with management of companies were the quality and effectiveness of the board, whether executive and board incentives were “aligned with value creation”, “climate and natural capital”, and the impact of the company “on people.”

The report says that BlackRock “has been encouraged by companies’ responses to the turbulent events of 2020 as well as the co-ordinated efforts emerging between companies, governing bodies and investors to accelerate progress on environmental and social risks and opportunities.”