BlackRock CEO Larry Fink said in a letter that his asset management company would extend choice in proxy voting to more large-scale investors.
The firm, which handles roughly $8 trillion in assets, has been criticized for leveraging shareholder votes on behalf of clients to support the company’s own interests, which are linked to the environmental, social, and governance movement, also known as ESG. The letter from Fink announced that BlackRock will promote a “new era of shareholder democracy” by expanding voting choice to more institutional clients.
“It’s clear there are investors who don’t want to sit on the sidelines; they have a view on corporate governance, and they want a meaningful way to express those views,” the executive wrote. “While some pension funds have long been actively involved in corporate governance, we’re working to make that easier and more efficient for a larger number of investors. We are committed to continually evolving this offering.”
A number of conservative-led state governments have recently pulled funds from BlackRock and other asset managers over concerns that the companies’ voting priorities, such as pressuring portfolio companies to transition away from fossil fuels, are a threat to their states’ economies and the maximization of returns. In addition to divestments from South Carolina, Louisiana, Missouri, West Virginia, and Utah, the government of Texas revealed that BlackRock and nine other firms had violated state law by “refusing to deal with” companies involved in the production and use of fossil fuels “without an ordinary business purpose.”
Fink clarified in his letter that nearly half of the company’s index equity assets under management are now eligible for voting choice, including “all the public and private pension plan assets we manage in the United States.” David Bahnsen, the founder of Manhattan-based wealth management firm The Bahnsen Group, told The Daily Wire that although the conservative backlash against ESG may be “marginally present” as a factor behind BlackRock’s move, executives are likely responding to broader market forces.
“Blackrock is run by smart people. There is plenty to criticize and plenty to compliment, but they are not lacking in business savvy,” Bahnsen said. “They see where the puck is going and are commendably trying to skate there first … I think the simplest explanation is that Blackrock sees the inevitability of change and evolution in this respect and is facilitating solutions gradually.”
Indeed, an exclusive poll from The Daily Wire showed that 64% of respondents believe “individual investors whose savings are being invested” should ultimately decide whether retirement and pension funds are allocated according to ESG standards, while a mere 20% believe that “Wall Street asset managers” should make such decisions.
Bahnsen added that voting choice for institutional clients is “easily scalable,” while individual investors are unlikely to take advantage of the opportunity. “The technical and operational scale needed to deliver such a capability to individual clients will require more time and investment,” he remarked. “They have to start with institutional clients first because they are the ones who will actually use it, where all studies indicate 99% of retail clients do not vote their shares even when they actually own them.”