BlackRock wants more diversity in company executive boards and is pushing portfolio companies to strive toward net-zero climate goals, even as the world’s largest asset manager remains firmly invested in fossil fuels, according to a 2022 policy update released on Dec. 14.
“We have engaged companies on board diversity for many years. That engagement informs our voting guidelines for 2022,” the statement reads. “For example, in the U.S., we believe boards should aspire to 30 percent diversity of membership and encourage companies to have at least two directors on their board who identify as female and at least one who identifies as a member of an underrepresented group.”
The New York-based investment company, managing assets all over the world to the tune of $9.46 trillion, has followed the steps of other big-name investors in persuading companies in their portfolios to comply with progressive guidelines on climate change, hiring, and governance.
Earlier this month, Goldman Sachs Asset Management announced that it wants companies in which it has invested to have boards with at least 10 percent female directors and one director from an under-represented group. If companies don’t comply, Goldman Sachs will cast proxy votes against those nominated by the board. BlackRock hasn’t specified whether it will take similar retaliatory actions.
Specific demographic data upon which investment companies such as BlackRock and Goldman Sachs base their policies is now readily available. This data collection, especially in the United States, is likely to keep on growing, according to a BlackRock spokesperson. Underrepresented people can include people with disabilities, veterans, ethnic or racial minorities, and those who identify as LGBTQ.
The investment companies are citing rising expectations from shareholders, employees, and customers for the change in policies, although a business survey by advisory firm Brunswick Group shows an increasing number of U.S. consumers want executives to stay out of social issues and simply focus on their businesses.
The latest policy update states that BlackRock encourages “companies to demonstrate that their plans are resilient under likely decarbonization pathways, and the global aspiration to limit warming to 1.5°C [Celsius].” However, Chief Executive Larry Fink told a virtual audience at the MIT Golub Center for Finance and Policy’s eighth annual conference that he believes that BlackRock must remain invested in coal.
“Keep in mind, if a foundation or an insurance company or a pension fund says, ‘I’m not going to own any hydrocarbons,’ well, somebody else is, so you’re not changing the world,” he said.
According to activist groups Urgewald and Reclaim Finance, BlackRock has invested about $85 billion in coal-related assets. BlackRock operates in 38 countries with more than 16,000 employees. The company has faced criticism for its anti-competitive behavior and its broad investments in China.
Based on 2021 data (pdf) from Spencer Stuart, 47 percent (22 percent in 2020) of new independent directors in S&P 500 companies are black, Hispanic, Native American, Asian, or multiracial, compared to 21 percent for existing directors. Forty-three percent of all new directors were women, compared to 47 percent in 2020 and 30 percent existing female directors.