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Teneo U.S. ESG Roundup 12.15.22

December 15, 2022
By Matt Filosa, Faten Alqaseer, Owen Farley & Sam Sorkin

Our bi-weekly spotlight explores key ESG-related market developments and their implications for corporates and investors.

ESG in the News

The Teneo Governance team has published a new client brief, "Be Careful What You Wish For: Four Potential Consequences of Pass-through Voting For Companies." The brief defines the new “pass-through” proxy voting initiatives by asset managers such as BlackRock and highlights the potential consequences on company shareholder engagement programs and annual meeting outcomes.

The activist investor Bluebell Capital is attempting to oust BlackRock CEO Larry Fink over inconsistency in his environmental, social and governance initiatives, as the firm has faced serious political backlash. Bluebell has promoted climate and governance campaigns at multiple high-profile companies since its founding in 2019 and seeks a new leader that it hopes can avoid attracting an “undesired level of publicity.” In the midst of activist and political campaigns against BlackRock, Mr. Fink recently initiated the next stage of the company through appointing new leaders across several business units.

  • Teneo Takeaway: BlackRock continues to be in an increasingly unenviable position on ESG, receiving criticism from all sides. In addition to a letter sent to the firm by 19 Republican attorneys general over the summer, this week a Texas Senate committee has subpoenaed BlackRock for documents and asked for executives to attend a hearing on its ESG activities. 

The Global Reporting Initiative published an initial exposure draft of the Topic Standard Project for Biodiversity, which aims to represent internationally agreed best practice and align with recent developments and relevant authoritative intergovernmental instruments in the field of biodiversity. The Standard will enable an organization to publicly disclose its most significant impacts on biodiversity and how it manages them. GRI disclosures on biodiversity were last updated in 2006.

  • Teneo Takeaway: The public comment period on the exposure draft runs from December 5, 2022 – February 28, 2023. It also seeks to align with the draft standards form the Task-force on Nature-related Financial Disclosure (TNFD). 

The Republican minority on the Senate Committee on Banking, Housing, and Urban Affairs described BlackRock, Vanguard and StateStreet as "new emperors," exercising enormous influence over shareholder meetings to promote woke political agendas. The whitepaper recommends congressional investigations, bolstered disclosure requirements, and further legislation. These Senators also specifically imply that the 'Big Three' firms have influenced their banking organizations to conform its lending activities to ESG principles – which could be deemed as a “controlling influence” over that banking organization and force additional capital and liquidity requirements on their business. In response to the report, BlackRock called the conclusions “flawed … and risk harming millions of everyday investors that rely on mutual funds and exchange-traded funds to help them retire with dignity.”

  • Teneo Takeaway: As Republicans take control over the House of Representatives and key committees, expect several hearings focusing on how asset managers incorporate ESG into their investment decisions. 

State Street Global Advisors, the asset management business of State Street Corporation, announced it will offer investors the power to direct how shares held in funds they own are voted. Eligible investors in certain institutional funds in the U.S. and the UK will have the ability to either vote their own shares directly or delegate proxy voting of their shares to the firm’s asset stewardship team. “The new voting choice program is a recognition of how important participation in proxy voting is to our clients,” said Lochiel Crafter, executive vice president and head of the Global Institutional Group of State Street Global Advisors. “Giving even more investors the chance to choose how to vote shares held in funds they are invested in will remain a priority.”

  • Teneo Takeaway: The move by SSGA follows a similar decision by BlackRock through its “Voting Choice” initiative, which offers investors more voting opportunity over their own funds. Vanguard and other investors have also announced similar plans, and many other asset managers are likely to follow suit.”

Nicolai Tangen, CEO of Norway’s $1.3 trillion oil fund, says the world’s largest sovereign wealth fund is set to become a more vocal shareholder. He plans for the fund to vote against companies that fail to set a net zero emissions target, overpay their top leaders, or do not have sufficiently diverse boards. The former hedge fund manager said that Norway’s fund “can vote more against the companies where we have different expectations about how they behave.” On average, the fund owns 1.5% of every listed company. Tangen added in a warning to the directors and boards of companies without a target to reach net zero emissions that the fund would “absolutely” vote against them.

  • Teneo Takeaway: This announcement is a good reminder of how the “anti-ESG” movement will likely also result in “pro-ESG” asset managers and owners becoming even more vocal about their ESG priorities, especially in Europe. 

They Said It: ESG Influencers Speak Out

The FT’s U.S. investment and industries editor Brooke Masters wrote in an opinion piece that due to political uncertainty and regulatory delays over ESG rules in America, “companies, investors and asset managers now find themselves in legal jeopardy from several directions, making it hard to come up with a coherent strategy or workable business plan … Private litigation is proving to be another multidimensional headache.”

Looking Ahead: Upcoming ESG Events

  • The World Economic Forum Annual Meeting, WEF (Davos, Switzerland) – January 16-20, 2023
  • Greenbiz 23, Greenbiz (Scottsdale, AZ) – February 14-16, 2023
  • Aspen Ideas: Climate, Aspen (Miami, FL) – March 6-9, 2023
The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.

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