The world’s largest asset manager, BlackRock, has joined forces with nonprofit sustainability leader Ceres to provide a guidebook for U.S. institutional investors on engaging with companies and policymakers on sustainability issues. 21st-Century Engagement: Investor Strategies for Incorporating ESG Considerations into Corporate Interactions includes tactics and case studies from 37 engagement experts spanning six countries.
The guide comes amid growing concern in the capital markets about global sustainability risks that could materially impact company performance, including climate change and water constraints such as we’re seeing today in California and Brazil, or human rights tragedies unfolding globally.
“As a long-term investor on behalf of our clients, BlackRock believes we have a responsibility to engage with companies on a range of governance matters, including the material environmental and social impacts of their operations,” said Michelle Edkins, Managing Director and Global Head of Corporate Governance and Responsible Investment at BlackRock. “In our experience, companies that manage all dimensions of the business to the highest standards are more resilient and generate more sustainable financial returns over time. We’re encouraged by the efforts leading companies are making in reporting material ESG risks and opportunities, which helps shareholders and others understand how effectively risks are being mitigated and opportunities realized to protect and enhance long-term economic returns. We hope this guide helps broaden and deepen company-investor dialogue on the ESG factors that impact value creation and would like to thank all those who shared their insights.”
Showcasing dozens of real-world examples of investor engagement with companies, contributors cover issues such as setting ESG standards in the marketplace, public policy engagement, collaboration, shareholder resolutions, board of director engagement, divestment, creating a focus list, strategies for international engagements, and other topics. The guide also features a set of ESG-themed questions that portfolio managers and analysts should be asking of companies in key sectors.
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"Every year for the past decade, we have seen an increase in corporate engagement by institutional investors on sustainability issues – especially climate change, resource constraints, diversity and human rights – which create enormous economic risks for both companies and investors," said Mindy Lubber, president of Ceres. "The number of sustainability-focused shareholder resolutions continues to rise. We’re also seeing upticks in other engagement strategies, such as investors meeting with boards, negotiating with executive teams and asking hard, pointed questions on earnings calls and at annual meetings. This valuable guide outlines various ways for investors to boost their engagement with companies on these issues.”
TIAA-CREF and CALSTRS also contributed their expertise to the guidebook. TIAA-CREF has a long history of quietly engaging with portfolio companies on ESG risks, while “CalSTRS’ investment staff reviews not only the financial potential of investments, but also their social, human and environmental impacts to the ultimate benefit of our members–California’s teachers,” said CalSTRS Director of Corporate Governance Anne Sheehan. “CalSTRS is pleased to share our experience and to learn from others how to improve our processes. We applaud BlackRock and Ceres for teaming up on this guide. It will help inform others of the how and why we investors need to manage ESG risks.”