By Ross Kerber, Sinead Cruise and Simon Jessop
BOSTON/LONDON (Reuters) - Pressure on BlackRock Inc's record on climate issues may be having an effect as the world's largest asset manager weighs firming up its interactions with portfolio companies.
The New York-based asset manager has stressed the importance of the societal issues known as ESG, like climate change and workforce diversity, that are popular with younger investors. So far BlackRock has resisted steps sought by critics, such as giving more details of its talks with oil company executives or backing many shareholder resolutions.
But that may be changing as BlackRock prepares for the 2020 proxy season in the spring, said several people who have spoken with BlackRock (N:BLK) executives and hinted at by the company itself.
In a statement emailed by a spokesman BlackRock said that "We share the concern about climate risk and its impact on shareholder value for all companies. Indeed, we believe evidence of the impact of climate risk on investment portfolios is building rapidly and we are accelerating our engagement with companies on this critical issue."
The spokesman, Ed Sweeney, did not provide more details.
Moira Birss, a director of Amazon (NASDAQ:AMZN) Watch, which advocates for indigenous peoples and rainforest conservation, said she expects BlackRock may change its engagements with agribusinesses based on recent conversations she held with BlackRock executives.
"It's a positive sign that BlackRock is willing to directly engage with us," although it remains to be seen if satisfactory changes result, she said.
Tim Smith of ESG-focussed money manager Boston Trust Walden, who often talks with BlackRock executives, said he expects them to press corporations harder in the coming year to adopt climate-impact reporting guidance. He said BlackRock executives seem more receptive to climate and other concerns heading into 2020, as competing asset managers take more aggressive stands on environmental matters.
"They need to pay attention to this issue, especially if they lose business because of it," he said.
Activists say they will be watching for BlackRock CEO Larry Fink to outline some new approaches in his annual letter due in January.
Most big fund firms face similar calls to become more active on ESG matters, which they must balance against other client priorities like performance. BlackRock draws the most attention because of its $7 trillion in assets and because it rarely challenges management, even at poor performers, as a Reuters analysis found.
BlackRock says it lobbies effectively behind closed doors. Previously, BlackRock has made targeted changes like encouraging boards to have at least two women and urging companies to report according to the Financial Stability Board's Task Force on Climate-related Financial Disclosures.
Critics say the quiet approach undercuts pressure from other shareholders. Cliff Weight, director at ShareSoc, the UK Individual Shareholder Society, said BlackRock could still give more details around its talks with companies.
Of BlackRock's current disclosures about its engagements, Weight said, "We question whether this is a marketing exercise" meant to impress clients.
BlackRock also faces pressure from some public pension funds that have taken a harder look at the ESG practices of fund managers handling their money. Seattle public employee pension officials say they continue to monitor BlackRock's interactions with companies whose shares it owns.
The chief investment officer of Japan's big Government Pension Investment Fund, Hiro Mizuno, has urged asset managers to incorporate ESG into their investment processes.
Annual reports of the Japanese fund show BlackRock managed 2.7 trillion yen ($25 billion) in foreign equities passive money as of March, almost half as much as a year earlier. A fund spokeswoman declined to discuss the change and noted that factors like fees also weigh on allocation shifts.
BlackRock has given little indication a deep stewardship overhaul is in store, though it has cast a number of high-profile critical votes. One came May 29 against Exxon Mobil Corp's (N:XOM) presiding director Steven Reinemund, BlackRock fund disclosures show.
Asked about the vote, an Exxon spokeswoman said, "We welcome and value input from all shareholders."
BlackRock did not explain the vote or say if Exxon was the U.S.-based global energy company of which BlackRock reported it opposed a director due to "lack of progress on climate-related disclosure."