BlackRock Investment Stewardship (BIS) said it supported fewer shareholder proposals in the 2022-23 proxy year due to the record number of submissions and their continued decline in quality.
In the U.S. there was a 34% increase in shareholder proposals focused on climate and natural capital risks (environmental), as well as company impacts on people (social) according to a report from BIS. The report covered proxy voting on behalf of clients between 1 July 2022 and 30 June 2023, the U.S. Securities and Exchange Commission’s 12-month reporting period for U.S. mutual funds, including iShares.
“We observed a greater number of overly prescriptive proposals or ones lacking economic merit,” added BIS. “Because so many proposals were over-reaching, lacking economic merit, or simply redundant, they were unlikely to help promote long-term shareholder value and received less support from shareholders, including BlackRock, than in years past.”
Joud Abdel Majeid, Global Head of Investment Stewardship at BlackRock, said in the report that BIS evaluates each shareholder proposal on its economic merit, considering the company’s individual circumstances and maintaining a singular focus on the proposal’s implications for long-term financial value creation. She said a number of shareholder proposals did not warrant support because they sought simplistic outcomes to issues, overlooked the competing priorities companies were balancing and the complexity and interconnected nature of the issues.
“In our assessment, there was an uptick in the number of such shareholder proposals that were overly prescriptive or unduly constraining on management decision-making,” added Majeid. “Importantly, many proposals failed to recognize that companies had already substantively met their request.”
BIS voted against nearly all, 91%, out of a total of 813 shareholder proposals it voted on globally Considering only those proposals on climate and natural capital and company impacts on people, BIS supported 26 out of 399 it voted on globally, or 7%.
The report also highlighted that there have been steady improvements in the reporting published by companies for which a transition to a lower carbon economy is a material risk since 2021. More than 1,000 such companies, 78%, now report across all four pillars of the Task Force on Climate-related Financial Disclosures (TCFD), up from 57% in 2021.
BIS did not support 213 proposals at 155 companies related to the election or discharge of directors because of concerns regarding inadequate disclosure or effective board oversight of climate-related risks, compared to not supporting 270 similar proposals at 201 companies last proxy year
In the 2022-23 proxy year, BIS held 4,000 engagements with more than 2,600 unique companies in 49 markets, effectively covering more than 75% of the value of clients’ equity assets managed by BlackRock. It supported 89% of director elections of 76,700 director elections BIS voted on, which it said was consistent with its voting in recent years.
BIS also noted that over the past 12 months, BlackRock continued to expand Voting Choice to provide more options for investors who want a more direct role in the stewardship of their capital. Clients representing over $586bn in assets under management have chosen to participate in Voting Choice to express their preferences.
The fund manager has also announced a plan to expand Voting Choice to its largest ETF, subject to approval, which it said would give millions of individual U.S. investors the option to choose from a range of different voting policies for their respective share of ETF votes.
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