BlackRock has been accused of “hypocrisy” on its voting record at oil giant ExxonMobil on the same day it releases a report on environmentally responsible investing.
Vanguard and other asset management giants have also been accused of failing to abide by the UN Principles for Responsible Investment to which they are signatories, by the Asset Owners Disclosure Project.
By voting against a motion that would have required ExxonMobil to make disclosures about the impact of climate change on the business the asset managers ignored responsible investment commitments they had made, the AODP says in its ExxonMobil Investor Engagement Report.
The criticism comes the same day the BlackRock Investment Institute releases a report, written by vice chairman Philip Hildebrand and global head of impact investing Deborah Winshel, which states investors “can no longer ignore climate change”.
“We believe all investors should incorporate climate change awareness into their investment processes,” BlackRock’s Adapting Portfolios to Climate Change report states.
ExxonMobil put the motion to investors at its AGM in May, but voting on the issue only became public on 31 August via a Securities and Exchange Committee filing.
AODP chief executive Julian Poulter says: “Asset managers and asset owners who helped Exxon defeat this modest climate resolution are not only risking their own money, they are betraying the millions of ordinary people whose pensions are invested in Exxon stock.
“Our analysis also reveals disturbing hypocrisy, with many investors ignoring responsible investment commitments they have made.”
The motion had followed last year’s Paris Climate Summit where world leaders commited to keeping a change in climate below 2 degrees. The US and China both ratified the agreement ahead of this week’s G20 meeting in Hangzhou.
BlackRock and Vanguard, which collectively hold 11 per cent of stock and are ExxonMobil’s largest shareholders, both voted against the motion despite being signatories to the UN principles. JP Morgan, Capital Group and Franklin Templeton also rejected the motion and sided with ExxonMobil.
State Street Global Advisors, which owns 4.5 per cent of capital supported the climate resolution.
Principle three within the UN PRI states that investors will seek “appropriate disclosure on ESG issues by the entities in which we invest”.
Today’s BlackRock report includes a section on ‘stranded assets’ in the fossil-fuel industry, referring to the potential for oil reserves to become obsolete if governments start taxing fossil fuels to such a degree that extracting them is no longer financially viable.
“We believe climate risk factors have been under-appreciated and underpriced because they are perceived to be distant,” BlackRock Investment Institute senior director Ewen Cameron Watt said in a statement accompanying the report’s release.
The report argued there were four market risks related to climate change, including: technological advances in energy that undermine existing business models; regulatory focus on curbing carbon emissions; increasingly frequent extreme weather events; and social pressures for greater climate awareness.
While the motion to encourage carbon disclosure from ExxonMobil was defeated, 38 per cent of shareholders voted in favour of the motion with proxy voting advisers ISS and Glass Lewis also announcing support.
Responding to the AODP’s criticism, a BlackRock spokesperson said: “We prefer to engage with companies directly on complex issues such as adaptation to a low carbon economy. We have engaged extensively on a range of issues related to the themes of these shareholder proposals. Where a company is unresponsive, we hold board members accountable.”
A spokesperson from Vanguard says: “We remain confident that our voting and engagement activities are wholly consistent with the commitment we have made to the PRI.”
The AODP report also found the majority of pension and retirement funds did not respond to members that urged them to support climate resolutions at the AGM. This included 141 PRI signatories, despite a commitment in the UN code that they would report on “activities and progress towards implementing the principles”.
Ninety-nine per cent of funds in the US failed to respond to their members, 85 per cent in Europe, 83 per cent in Canada and 82 per cent in Asia Pacific.
The most commonly cited reason firms did not disclose their voting plans for the AGM were that they relied on their asset managers to vote. Others said they invested through pooled funds or relied on proxy voting advisers.
Poulter says: “Funds should direct their asset managers to vote their shares in line with their responsible investment commitments.”
Poulter says asset managers played a “critical role” in helping ExxonMobil defeat the climate resolution.