BlackRock has played a leading role in increasing awareness of sustainability as a driver of investment and of the need for businesses to address the risks and opportunities for tackling climate change.

Amra Balic, who heads up BlackRock’s EMEA Investment Stewardship Team, joined the FRC’s Climate Thematic launch to share her perspective.

Over the past few years, BlackRock has met with many companies in order to understand how their leadership teams and boards are managing and overseeing disclosure in relation to climate risks and opportunities.

In January 2020 BlackRock announced a number of initiatives placing sustainability at the centre of its investment approach. The announcement highlighted the importance of climate as an investment risk – declaring BlackRock’s intention to put climate at the heart of everything it does when it comes to investing on behalf of its clients.

BlackRock is one of the founding members of the Task Force on Climate-related Financial Disclosures (TCFD) and is a member of the Institutional Investor Group on Climate Change, the UN Principles for Responsible Investment and Climate Action 100+.

Amra explained that BlackRock’s Stewardship Team, alongside the investment business, has intensified its engagement with companies on sustainability-related matters. It has refreshed its five engagement priorities:

  • corporate governance
  • executive pay
  • environmental risks and opportunities
  • long term strategy and capital allocation
  • human capital management.

It has also updated its voting guidelines and has published on its website a clear indication of key performance indicators for each of these priorities, to help guide companies in their thinking around implementation and their disclosures around policies on these key issues.

Transparency is key

 

BlackRock asks companies to improve transparency on an ongoing basis, and believes it is important to reflect this in its own actions: information on these and on the views it has formed based on its work with companies, is available on the BlackRock Investments website.

BlackRock has moved this year from annual to quarterly voting disclosures. Additionally, on high-profile votes, it has been disclosing its votes promptly, with an explanation of how it reached those voting decisions. Its stewardship annual report also includes the topics it has discussed during engagement with companies.

When voting on shareholder proposals on sustainability, BlackRock has been engaging with companies on sustainability-related questions for several years, urging management teams to make progress on a range of sustainability-related matters. It is increasingly likely to vote against management at shareholder meetings where it isn’t seeing progress.

BlackRock see the TCFD framework and SASB standards as complementary 

It considers The Sustainability Accounting Standards Board (SASB) framework a globally relevant standard for reporting to investors, as there is a clear sense of linkage to financial materiality, making it useful for decision-making in investment processes. It is industry specific because sustainability matters are very different between sectors or industries. Although SASB is often perceived to be US-focused, Amra highlighted that over 40 percent of companies reporting against it today are outside the US and she anticipates that this trend will continue.

Where companies are already using different standards, such as the Global Reporting Initiative framework (GRI), Blackrock has asked them to map their existing reporting to the metrics identified by SASB.

TCFD is focused on climate risk reporting and has four pillars: governance, strategy, risk management and metrics and targets. SASB supports this because its standards provide the content, which is particularly relevant for TCFD’s fourth pillar (metrics and targets).

One of the key advantages of TCFD and SASB from an investor perspective is that each is grounded in the language of business planning and business operations.

BlackRock has welcomed recent announcements around global convergence of sustainability reporting frameworks. It is also encouraged to see that government bodies such as the UK and New Zealand governments are recommending and mandating TCFD reporting.

What will BlackRock do going forward? 

 

BlackRock plans to continue to contribute directly to the development of both frameworks. Amra also highlighted that the TCFD and SASB frameworks have been finalised for 3-4 years now, so the acclimation period for these new frameworks is now over.  BlackRock expects companies to align their reporting with the recommendations of both frameworks and would be likely to vote against management when companies are not making this shift in their reporting.

Find out more

Click here to view a recording of the full launch event, including presentations and a Q&A from the FRC, BlackRock, ITV and Conran Design Group.

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