BlackRock posted its updated Investment Stewardship Global Principles and US Proxy Voting Guidelines effective as of January 2022. According to the summary, notable updates to the principles include (emphasis added):
- Climate risk: We continue to ask that companies disclose a net zero-aligned business plan that is consistent with their business model and sector. For 2022, we encourage companies to demonstrate that their plans are resilient under likely decarbonization pathways, and the global aspiration to limit warming to 1.5°C. We also encourage companies to disclose how considerations related to having a reliable energy supply and just transition affect their plans.
- Board diversity: We are strengthening our focus on diversity of personal characteristics on boards, which in our view should aspire to have meaningful diversity of membership, at least consistent with local market regulatory requirements and best practices. We recognize that building a strong, diverse board can take time.
- Sustainability reporting: Given continuing advances in sustainability reporting standards, in addition to our ask that all companies report in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), we are evolving our perspective on sustainability reporting to recognize that companies may use standards other than that of the Sustainability Accounting Standards Board (SASB), and reiterate our ask for metrics that are industry-or company-specific.
- ESG in executive compensation: We highlight that if environmental, social, and governance (ESG) criteria are included in executive compensation programs, those metrics should be rigorous, aligned with a company’s strategy and business model, and linked to company performance.
- Changes to corporate form: We introduce our position that companies or shareholders proposing to change a company’s corporate form (e.g., public benefit corporation) should put the measure to a shareholder vote, if not already required to do so under applicable law. Managers or shareholders proposing the changes should clearly articulate in their proposal how shareholders and different stakeholders would be impacted.
In the US specifically, as to board diversity, BlackRock encourages companies to have at least two self-identified female directors and at least one director who self-identifies as a member of an underrepresented group, and to aspire to have diverse directors represent 30% of the board. Its explicit board diversity and self-evaluation disclosure expectations are set forth on page 7 of the US Proxy Voting Guidelines. Companies that fail to evidence through their disclosure that the board has adequately accounted for board diversity over a reasonable time period may garner a “no” vote against members of the Nom/Gov Committee.
As to sustainability-related disclosure, US companies are asked to disclose the identification, assessment, management, and oversight of sustainability-related risks in accordance with the four pillars of TCFD and to publish investor-relevant, industry-specific, material metrics and rigorous targets, aligned with SASB or comparable sustainability reporting standards.
See Perkins Coie’s post and additional information and resources on our Institutional Investors page.
This post first appeared in the weekly Society Alert!