Shareholders request the Board of Directors produce a report specifying whether and how BlackRock could improve its pension fund clients’ investment returns, by focusing its climate-related investment stewardship and proxy voting to “engineer decarbonization in the real economy,” mitigating BlackRock’s forecast cumulative loss in global output, due to unabated climate change, of nearly 25% in the next two decades, thereby improving financial returns to BlackRock shareholders.
This proposal was filed by Paul Rissman. Climate change poses material financial risk to BlackRock shareholders if BlackRock is perceived to act counter to pension clients’ interests. BlackRock’s pension business comprises $3.2 trillion of $10 trillion total assets under management (AUM).1
Pension fiduciaries have long-term interests: “In a pension, the duty of impartiality...extends to participants currently receiving benefits and to participants who will receive distributions in the future. Plan administrators must be able to make current distributions while protecting the overall viability of the plan to protect the distributions that will be made many years later.” Unmitigated climate change will cause economic damage: BlackRock forecasts “a cumulative loss in global output of nearly 25% in the next two decades.”3 This type of economic loss will devastate long-term portfolio returns of BlackRock’s pension fund clients, jeopardizing their ability to support future retirees.
Despite this danger, BlackRock denies a duty of care to actively diminish this risk. BlackRock states that its role is “not to engineer a specific decarbonization outcome in the real economy.”4
Many of BlackRock’s largest clients feel that as the world’s largest asset manager, BlackRock does have this responsibility. The Chief Investment Officer of the Government Pension Investment Fund of Japan (GPIF), the world’s largest and a BlackRock client, said, “[w]e evaluate how you control externalities caused by your portfolio companies’ business.”5 This quote appeared in an article speculating that BlackRock had lost $50 billion of GPIF’s business to another firm with more rigorous financial risk evaluation. In 2016 the Seattle City Employees’ Retirement System put BlackRock on a watch list for neglecting sustainability concerns.6 In 2022 the New York City Comptroller threatened to withdraw funds from BlackRock if it did not get tougher with investee companies.7
BlackRock recognizes the danger of losing client assets as a result of climate risk. Its 2021 10-K states, “[c]limate-related...risks could impact BlackRock...indirectly through adverse impacts to its clients, including as a result of declines in asset values, [or] changes in client preferences, [which] may cause the Company’s AUM, revenue and earnings to decline.” Shareholders deserve to know whether BlackRock has a plan to diminish potential long-term pension client losses by pledging to use stewardship and proxy voting to mitigate its forecast 25% climate- related decline in global economic output over the next two decades.
We urge shareholders concerned with potential reputational and financial damage to BlackRock, due to its refusal to engineer real world decarbonization on behalf of pension client portfolios, to support this resolution.