Skip to content

What does it mean to be a good steward in today’s world? BlackRock, the world’s largest asset manager, invited Nutmeg and other investment firms to discuss how best to use voting and engagement to promote better and more sustainable corporate behaviour.

BlackRock chief executive Larry Fink recently announced the firm’s intent to accelerate sustainable efforts, with a particular emphasis on increasing access to sustainable investing and enhancing engagement, voting and transparency in stewardship. BlackRock has since held a stewardship roundtable attended by Nutmeg and other members of the wealth management industry, as well as analysts, corporate governance professionals, researchers and other industry representatives.

Stewardship at scale

The event set out to provide an overview of BlackRock’s investment stewardship processes and approach to voting and engagement. BlackRock boasts the largest stewardship team in the industry. On average the firm partakes in over 2,000 engagements annually with over 1,450 public companies in 42 markets. This amounts to over 16,000 meetings on over 150,000 proposals annually¹.

Voting records and the rationale behind voting guidelines was a prime topic of questioning and scrutiny from the table. BlackRock has made publicly available its voting records globally on a quarterly basis, alongside voting guidelines at a regional level, noting that differences exist in these guidelines at a regional and market level because of differences in how votes can be executed. The panel questioned why voting decisions are not made public prior to execution. BlackRock explained that they are disclosed in real time and not beforehand so as not to move the market and avoid potential acting in concert.

BlackRock said up to 30 votes each year attract a lot of media attention, out of votes on over 150,000 proposals, which marks a small proportion of overall engagements. BlackRock said it recognises the need for investors and general media to have a deeper understanding of the context and background behind voting rationale and has committed to publishing explainer documents.

Impatience is a virtue

Amra Balic, head of investment stewardship for Europe, Middle East and Africa, led the talks and provided examples of voting activities with global multinationals, some of which face scrutiny on environmental, social and governance (ESG) grounds. These included BHP Group, a global natural resources extraction firm, and Siemens, an industrial conglomerate that provides services and engineering to companies, including those in the energy sector. Given the prominence of energy, fossil fuels and emissions in the current global sustainability dialogue, these firms served as apt examples on which to present shareholder resolutions, voting records and the rationale for BlackRock’s vote.

Participants representing clients with greener mandates expressed a desire for faster shifts in how companies improve and disclose information. BlackRock said it is comfortable expressing “impatience” with companies and is specifically asking firms to comply with two global transparency and disclosing frameworks.

These frameworks are SASB reporting, based on standards by the Sustainability Accounting Standards Board that help public corporations disclose material, decision-useful information to investors; and TCFD reporting, a market-driven initiative from the Task Force on Climate-related Financial Disclosures, which was set up to develop a set of recommendations for voluntary and consistent climate-related financial risk disclosures in mainstream filings.

A pragmatic path

In his recent letter, Larry Fink said the firm would withdraw investments from thermal coal producers in BlackRock’s discretionary active investment portfolios. Members of the panel were quick to point out that this represents a fraction of the firm’s assets, the bulk being in passive mandates, not active ones.

BlackRock said its plan was to shift what investors consider as “core” products over time with the launch of numerous ESG-focused products. It said the primary focus in product development and sales teams in the last two years have been sustainable products. The firm has worked closely with major index providers and investment firms globally, including Nutmeg, to develop indices that reflect investor preferences within the sustainable investing space.

Fossil fuels remained a regular fixture in the questioning, with some representatives expressing the strong view that certain energy companies do not deserve any capital across any index mandates. BlackRock pointed out that in certain nations, in particular emerging economies, resources such as coal may be the only option in driving industries, powering homes and people’s livelihoods. It is easier to argue for divestment when you live in a developed economy with viable sources of alternative energy, it said.

A counterargument was that emerging economies face the most climate risk and therefore should be educated and, in some sense, protected from themselves. My own view here is that at some point the line of pragmatism in expectations must be drawn. BlackRock is an asset manager. Its core responsibility in a stewardship context is not to act as a supranational arbiter by attempting to influence the direction governments and economies take in achieving energy security. Rather, BlackRock’s responsibility is to direct and influence the companies it invests in.

Some argued that an inherent flaw in passive investing is the reality of index replication – that there is an absence of consequence because an ETF or index fund cannot simply sell and walk away. BlackRock countered by arguing that the stewardship wielded through passive investing is more powerful precisely because one cannot sell and walk away. It is more continuous, consistent and influential. At Nutmeg we share the same view; index investing is not problematic or lesser from a stewardship perspective. To quote Amra Balic of BlackRock, “it means one has a seat at the table every year”.

The enemy of the good?

In the world of investing, change is the only constant. However, the preferred pace of change naturally varies between investors. This was apparent at BlackRock’s event with some preferring a rapid, sharp or “cliff edge” approach to divesting from polluting industries and the adoption of exclusionary investment funds immediately as the new core product range. Others favoured a pragmatic, transitioned approach in the pursuit towards a lower carbon world, understanding the need to educate investors and the general public, and the right to have a choice. Having opposing views in this regard is not a bad thing, there is a need for both urgency and pragmatism, and both camps can act collectively to achieve the shared objective – a new age where sustainability and environmental considerations are inherent in the definition of investing.

To quote Voltaire (and Theresa May), we should not let the perfect be the enemy of the good. The steps taken by firms such as BlackRock – and Nutmeg – are a starting point in our collective efforts to move in the right direction.


  1. BlackRock Investment Stewardship Annual Report, 2019

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest.