BlackRock released its Investment Stewardship 2020 Annual Report. The report provides an overview of the asset manager’s engagements, views and voting statistics related to the 12-month period ended June 30, 2020. The report, which is double the length of last year’s, describes how the asset manager prioritized engagements with its portfolio companies, reaching the firm’s highest levels. In addition, the report indicates that the firm held more directors accountable this proxy season than it has in any other.

Key Takeaways.

Adaptation/Resilience. BlackRock predicts more engagements and voting proposals will center on corporate risks, such as climate change, social and racial equity, and demographic and technological changes. BlackRock wants to know from corporate leaders how they plan to strengthen business resilience and adapt business practices and strategies.

COVID-19-Related Decisions. BlackRock reminds companies that while the firm may have deviated in 2020 from selected voting policies—virtual shareholder meetings, poison pills, dividend issuances, off-cycle executive pay revisions and additional financings—companies are expected to provide justifications for their decisions and explain how these decisions factored in the interests of their stakeholders.

Board Quality. Globally, BlackRock reached the firm’s record number of oppositions to the reelection of over 5,100 directors. The top three areas identified for board improvement were (1) independence, (2) board diversity and (3) director overboarding.

Environment/Climate. BlackRock substantially increased its focus and engagements on environmental issues because the firm believes that a company’s practices relating to material environmental factors can indicate the strength of management and the business. The impact of climate risk on a company’s business has been a major concern of BlackRock, and the firm states that it has been focusing on carbon-intensive industries for the past few years.

Globally, BlackRock voted 55 times against director-related items (e.g., director elections and board discharge proposals) at 49 companies for insufficient progress on climate disclosure. The firm pursued voting action on climate-related issues against 53 companies and designated 191 other companies as “on watch” for being at risk of an adverse voting action in 2021 if these companies fail to make substantial progress.

Other Topics. The report also addresses other topics such as human capital management, capital allocation, corporate strategy, executive compensation, and reporting frameworks and standards.

Engagement and Voting Statistics.

Engagements. BlackRock ramped up the number of engagements, reaching historic numbers. Globally, there were over 3,000 engagements in the 2020 proxy season, a 48% increase from the 2019 proxy season (2,050). In the United States, there were 1,484 engagements, up 74% from the 2019 proxy season (855).

Most notable were engagement topics that addressed environmental and social matters that rose 299% and 173%, respectively, compared to the 2019 proxy season. Based on BlackRock’s five Engagement Priorities, globally the breakdown is as follows:

  • Board quality (1,593 engagements);
  • Environmental risks and opportunities (1,260 engagements);
  • Corporate strategy and capital allocation (1,427 engagements);
  • Human capital management (750 engagements); and
  • Compensation that promotes long-termism (1,185 engagements).

The impact of COVID-19 was addressed at 400 engagements.

Voting. Globally, BlackRock voted on 153,001 proposals at over 16,201 portfolio company meetings for the 2020 proxy season, compared with 155,131 votes cast at 16,124 meetings for the 2019 proxy season.

Opposition to Management Proposals. In the United States, BlackRock’s percentage of votes cast against management items on selected topics in the 2020 proxy season remained relatively unchanged from the 2019 proxy season:

  • Anti-takeover and related proposals (8% in 2020 vs. 7% in 2019);
  • Capitalization (7% in 2020 vs. 5% in 2019);
  • Compensation (6%, unchanged from 2019 proxy season);
  • Election of directors and related proposals (8%, unchanged from 2019 proxy season);
  • M&A and reorganizations (2% in 2020 vs. 1% in 2019); and
  • Routine business (1%, unchanged from 2019 proxy season).

Support for Shareholder Proposals. Globally, BlackRock supported 15% of 1,087 ESG-type shareholder proposals. In comparison with the 2019 proxy season, the percentage of shareholder proposals that BlackRock supported in the United States in the 2020 proxy season slightly fell for environmental and governance-related proposals, but slightly rose for social proposals:

  • Environmental (19% in 2020 vs. 24% in 2019);
  • Social (8% in 2020 vs. 5% in 2019); and
  • Governance (14% in 2020 vs. 19% in 2019).

Going Forward.

BlackRock believes that disruption and uncertainty will continue in the upcoming months. BlackRock, like Vanguard, as we previously discussed, plans to issue greater details going forward regarding its engagements and voting guidelines.