The world’s largest asset manager is making the disclosure of climate change risk a priority when engaging with companies it has a stake in.
BlackRock, which manages $5.1tn in assets, said it would engage with the companies most exposed to climate change and encourage them to report on this risk. It also threatened to vote against directors that overlooked climate risk.
Managing climate risk should be considered part of good governance, it said, and board members of companies particularly exposed will be expected to have “demonstrable fluency” concerning this risk.
“Where we have concerns that the board is not dealing with a material risk appropriately, as with any other governance issue, we may signal that concern… most likely by voting against the re-election of certain directors,” it said.
BlackRock is estimated to manage 7% of all global assets, and a shift in priorities towards climate change could increase the issue’s importance on company boards internationally.
The new focus comes from BlackRock’s Investment Stewardship Team, which is responsible for engaging with companies in the firm’s portfolio and for voting at shareholder meetings. Each year it picks a number of priority issues to engage with and this year climate risk was chosen, alongside increasing representation on boards and managing executive pay.
It said meaningful disclosures of climate risk were an “important step towards building understanding of the impact on individual companies, sectors and investment strategies”, and as climate risk was universal disclosure standards should be “applicable to listed companies across each market and, ideally… globally consistent”.
As an industry representative of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, BlackRock said it would encourage companies to follow the task force's framework on reporting.
BlackRock said it would seek to “engage in a constructive manner… [and] not to tell companies what to do”, but added it would “not hesitate to exercise our right to vote against management recommendations” to protect its long term interests.
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