By Dan Kirslis, CFP®, Financial Advisor
Photo above: Dan attends the BlackRock annual meeting online.

 

Chicory Wealth’s clients are interested in using their resources to create positive change in the world. There are several strategies to achieve this. Many people are familiar with divestment, or selling out of positions in companies that have a negative effect on the world, and impact investing, which means investing in a company that has a positive social mission. Perhaps less familiar is the third pillar to values-based investing: shareholder advocacy. Shareholder advocacy is a middle path. It means pushing companies in which you have an ownership stake to be better, which is just what we did at the annual meeting of BlackRock last month.

The principle way to practice shareholder advocacy is to sponsor and vote on shareholder resolutions. At Chicory Wealth, we take our responsibility to practice shareholder advocacy very seriously. As authorized proxy voters, we review and vote on every shareholder resolution for every company that our clients own. We also sometimes sponsor shareholder resolutions in partnership with our clients.

As a brief example of how this works, I’ll describe the May 21, 2020, annual meeting of BlackRock, the world’s largest asset manager. I attended this meeting online along with many other BlackRock shareholders and authorized proxies. There were four resolutions to be voted on: The first was to confirm the numerous board members, the second was to confirm executive pay raises (which we voted against), and the third was to approve an auditor.

The fourth resolution was presented by As You Sow, a leader in shareholder advocacy we work closely with at Chicory Wealth, and was the resolution we were supporting. It asked BlackRock to formally incorporate the interests of all stakeholders into its governance, meaning not just shareholders, but also employees, customers, suppliers, and communities.

The BlackRock Board unanimously recommended that shareholders vote for the first three resolutions, and against the fourth, which is what most of the shareholders and their authorized proxies did. The first three passed with a more than 95% approval rate, and the last was rejected by more than 95%.

Despite this lopsided result in the voting, many of the questions from shareholders were encouraging. The shareholder questions that dominated the discussion during the meeting indicated a lot of concern about climate change, deforestation, human rights, and other ESG (Environment, Social, Governance) considerations. There were questions from Amazon Watch, Code Pink, Mercy Investment Services, and other sustainably minded investors and shareholders.

In response to these questions, BlackRock said it is in the process of excluding coal from all of its actively managed portfolios, though they have not excluded every part of the coal consumption chain. They plan to have 100% of all actively managed funds ESG-integrated by the end of 2020. They also founded the Task Force on Climate-Related Disclosure, which seeks to keep business activity in line with the Paris Agreement. On the passive side, BlackRock claims it doesn’t have the authority to change what is in their clients’ index funds. Instead, they say they are creating more ESG-friendly indices for clients to choose and are trying to be more transparent about their non-ESG indices. They also claim they are trying to use their power to engage on these issues with other companies, though their voting record leaves a lot to be desired there.

We believe, as do others who participate in shareholder advocacy, that this process can lead to positive outcomes, even if it takes longer than we would like. In the case of BlackRock, they do seem to be doing more on these issues than the other large asset managers. For now, we have chosen not to divest from BlackRock, and instead to continue applying pressure for them to improve “from the inside”. In the future, we’ll be putting forward to them more shareholder proposals to address our concerns around environmental and social justice.

 

If you would like to talk about shareholder advocacy with Chicory Wealth, contact us to set up a call with one of our advisors.