In the context of - and seemingly responsive to - the DOL's recent bulletin on ESG investment considerations, mixed reactions to Larry Fink's Annual Letter to CEOs: "A Sense of Purpose," and concerns about the potentially significant impacts and influence wielded by a handful of large institutional investors, BlackRock's new "The Investment Stewardship Ecosystem" elaborates on and defends its investment stewardship approach and activities - effectively distinguishing itself from some other institutional investors whose actions may more likely call into question their motivations vis-a-vis their underlying investors.
Noteworthy takeaways include:
- The paper reiterates a number of times that BlackRock's chief focus is on generating long-term sustainable performance for its clients, and that it takes an engagement-first approach.
- Its engagement emphasis is on direct dialogue with companies on issues that it believes have a material impact on the company's financial performance.
- It has never initiated a shareholder proposal, initiated a proxy fight, led an activist effort against management, or sought a board seat as part of its stewardship activities.
- Although proxy advisors "can have significant influence over the outcome of both management and shareholder proposals" (citing this study), BlackRock and some of the other largest asset managers vote in accordance with their own policies, which is evidenced by an analysis of their FOR and AGAINST votes on shareholder (as opposed to management) proposals as compared to ISS's recommendations.
- BlackRock's incorporation of ESG factors into the investment process is not about injecting its own social or political views, but rather enhancing long-term risk-adjusted returns. In that regard, its ESG-related activities (primarily "G" to date) focus on those issues it believes will have a material impact on companies' long-term financial performance.
- Among the paper's "Key Observations": "Any decision about a company's strategic direction is up to the company's management, its board, and the majority of shareholders."
Also particularly noteworthy is the narrative on page 12 explaining the differences between activist investors, active managers, and active engagement.
CamberView's Eric Sumberg (former communications director for NYC Comptroller Scott Stringer) and Rob Zivnuska (former head of stewardship efforts for BlackRock's Americas investments) provide additional insights in this memo: "BlackRock Seeks to Reframe the Conversation on Investment Stewardship."