Sustainable Finance Newsletter - BlackRock, Vanguard shift proxy reporting

By Ross Kerber

Nov 29 (Reuters) - It can make for an interesting news story when a company's top investor publicly criticizes an executive pay plan or backs a shareholder resolution, which is why the scores of voting memos that BlackRock and Vanguard have issued in recent years often generate headlines.

But both top fund managers have dialed back the frequency of these memos as they shift to other reporting formats, I found in a review of their investment stewardship websites, a trend you can read about below in this week's main story.

You'll also find links to Reuters coverage of the carbon capture debate and how Amazon faced labor actions across Europe on "Black Friday."

Please connect with me on LinkedIn where I welcome comments and feedback. If you have a news tip, potential content, or general thoughts feel free to email me at ross.kerber@thomsonreuters.com.

This week's most-read

Why carbon capture is no easy solution to climate change

Greenpeace accuses China oil and gas firms of 'greenwashing' LNG purchases

Big Oil has a place in ESG funds, says Deutsche Bank CIO

BlackRock, Vanguard shift proxy reporting Top asset managers BlackRock and Vanguard have significantly reduced the number of memos explaining certain proxy votes in detail, the companies' websites show, as they shifted to broader reporting formats and took steps that eased pressure on corporate boards.

So far this year BlackRock has posted 20 “Vote Bulletins” on the stewardship section of its website spelling out some of the specific votes its funds cast at corporate annual meetings in 2023. BlackRock published 41 such bulletins for each of 2022 and 2021. Vanguard has posted 13 equivalent notes, which it calls “Voting Insights,” so far this year, down from 18 in 2022 and 37 in 2021. A Vanguard representative said it expects to publish about five more such notes by year-end, matching its 2022 pace but still half the number issued in 2021. The firms' previous high rates came as they put a new emphasis on environmental, social and governance (ESG) concerns. The asset managers often use the memos to spell out their thinking on ballot items like a call for an emissions reduction target at Chevron or an item to rescind support for a racial-equity audit at Home Depot.

BlackRock had issued just a handful of bulletins in the years before its CEO Larry Fink declared a new concern for climate issues at the start of 2020. Vanguard did not issue any insights that year, its website shows, but ramped them up in 2021, the same year it joined an industry effort to limit emissions.

The companies have since dialed back their efforts. BlackRock and Vanguard reduced support for shareholder resolutions on environmental and social matters, citing an increase in such proposals and that improvements at many companies had made further changes unnecessary. Vanguard also left the industry initiative.

Both companies said the declining frequency of the memos reflects their embrace of newer voting communications. These can provide a broader range of information, albeit with fewer details about reasons for some specific votes. Examples include a search function on BlackRock’s website, and Vanguard's "Key Votes" reports and regional briefs.

BlackRock said it uses "vote bulletins as one of many ways to provide insight into our engagements and proxy voting on new and topical issues," and said it also included more than 100 company-specific case studies in other stewardship reports this year.

"Over the last two years, we have observed steady improvements in corporate disclosures that help our clients understand how companies are prepared to deliver shareholder returns over time," BlackRock said. Vanguard said its voting material reflects investor feedback. "Our engagements with companies on material financial risks are based on principles of strong corporate governance and reflect our commitment to drive long-term returns for our investors," Vanguard said in a statement sent by a representative.

James McRitchie, a frequent filer of shareholder resolutions and publisher of corpgov.net, said the detailed memos from BlackRock, Vanguard and other big investors do executives and smaller investors a service by airing out concerns at individual companies. The broader material from BlackRock and Vanguard seems better-suited for index fund investors and others interested in the wider market, he said. McRitchie said he still would prefer to see more votes in favor of ESG resolutions, adding the new voting material does not fully compensate for lost voting support. He wishes top funds would pre-announce their votes, like some rivals.

Top fund firms, McRitchie said, “have tamped everything down a bit.” Company news The takeover picture for Australian energy producer Origin has been muddled by a government plan to accelerate the rollout of renewable energy, as this story spells out.

The CEO of Brazil's Petrobras said a $102 billion investment plan will 'revitalize' the state-run oil company, with expansions into fertilizers and renewable energy.

e-Commerce giant Amazon faced walkouts by workers across Europe on Black Friday, as trade unions looked to gain attention on the busiest shopping day of the year.

On my radar Watch out for more spats over the impact of ESG considerations by business like the response from the top U.S. business court judge in Delaware to an opinion piece by former U.S. Attorney General Bill Barr, who argued state rulings could abandon shareholders' interests.

Where to begin with this crazy story about how Sports Illustrated ran stories by fake writers, apparently using AI? (Sports Illustrated has denied parts of the report.) Maybe such fakery may be the problem that saves traditional journalism by making old-school reporting, done by actual people like me, more valuable. Just a little pipe dream.

My Reuters colleagues plan deep coverage of the upcoming United Nations COP28 climate summit to be held Nov. 30-Dec. 12 in Dubai, including a daily version of Sharon Kimathi's Sustainable Switch newsletter you can sign up for here.

(Reporting by Ross Kerber; Editing by David Gregorio)