For BlackRock Inc. co-founder Laurence Fink, bigger has always been better. That formula is now crashing into his promise to join the fight against climate change.
Fink, who built the company from a mortgage-bond specialist into the largest asset manager in the world, has a crew of just a few dozen to prod the thousands of companies in BlackRock’s $7 trillion of funds to toe a more environmentally friendly line.
With the annual proxy season set to kick off in earnest next month, when shareholders get a chance to confront corporate leaders, pressure is starting to build on BlackRock’s 47-person group known as the investment-stewardship team. Each member of the squad is responsible for as many as 500 companies, generating a workload so vast that it can be very difficult to probe too deeply, according to interviews with five current and former members of the stewardship team.
“BlackRock owes proper stewardship on each and every portfolio holding to its clients,” said Wolfgang Kuhn, a former Aberdeen Standard Investments fund manager who now works for responsible investment campaign group ShareAction. “It's doubtful that 50 people can cope with that.”
New York-based BlackRock said it takes “our role as a shareholder seriously,” adding that the firm voted against or withheld votes from 4,800 directors at 2,700 different companies last year. A spokesperson for the firm said investment stewardship is an “essential component of our fiduciary responsibility” and said the number of companies that each team member tracks is much less than 500.
“Given the groundwork we have already laid engaging on disclosure, and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures,” Fink wrote in a letter sent to clients in January.
BlackRock’s stewardship team, which it acquired in the 2009 purchase of Barclays Global Investors, is the biggest in the asset-management industry, and the company is planning to add to the group based on job postings on LinkedIn. The number of people employed in the unit has almost doubled from 26 in 2017.
Vanguard Group, BlackRock’s closest rival, has a stewardship team of 35 people, State Street Global Advisors has 12, Legal & General Investment Management has 16 and JPMorgan Asset Management has eight. BlackRock’s group was more active, engaging with 1,458 companies in the year ended June 30, 2019, while Vanguard’s total was 868 in the same period. Engagements generally involve private dialogue with the portfolio company on a matter material to its outlook, from its carbon footprint to the way it manages its employees.
Even after the 67-year-old Fink upped his ante this year with the threat to vote against company managers and boards with poor sustainability records, BlackRock’s detractors remained unpersuaded. The asset manager is under particular pressure because it’s among the biggest investors in the planet’s largest polluters, including Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc.
The money manager’s Paris office near the Palais Garnier opera house was briefly barricaded in February by activists, who sprayed the walls with graffiti and singled out investments in holdings such as Vinci SA and Total SA, among others.