BlackRock urged to take tough line with HSBC over climate change

BlackRock is facing calls to use its might as the world’s biggest asset manager to put pressure on HSBC to rein in its financing of the fossil fuel industry, just weeks after fund boss Larry Fink warned that climate change was an investment risk.

Two of BlackRock’s British pension fund clients have urged the asset manager to support a climate resolution filed by a group of shareholders at HSBC’s annual meeting in April. The resolution asks the bank to publish a strategy around climate targets and reduce its exposure to fossil fuels.

The $8.7tn asset manager had historically outsourced its decision on how to vote at some banks because its largest shareholder was PNC, a bank. Clients are now closely watching how it will vote at HSBC after PNC sold its stake in BlackRock last May and Fink promised to put sustainability at the heart of how BlackRock invests.

“Our expectation is that BlackRock will do the right thing by the planet and the millions of investors they manage assets for,” said Clare Reilly, chief engagement officer at PensionBee, which has more than 400,000 customers. “We are asking BlackRock, and all our managers, to support this resolution.”

Owen Thorne, portfolio manager for monitoring and responsible investment at Merseyside Pension Fund, which oversees £9.8bn for local authority workers, said the retirement scheme planned to speak to BlackRock, as well as State Street Global Advisors, to make “clear our support for the resolution and ask them to consider this in their voting decision and engagement with HSBC”. The pension fund is a co-filer of the HSBC resolution.

“This is the perfect opportunity for BlackRock, whose track record on voting for climate resolutions has been somewhat lacking, to truly prove its commitment to the net-zero transition,” he added.

BlackRock said it was in talks with HSBC, on behalf of its clients, “to advocate for the business practices that deliver sustainable long-term value”.

“We will continue to engage with HSBC, including on this climate resolution, as we perform our analysis in the run-up to the AGM,” the asset manager added. According to S&P Global Market Intelligence, BlackRock is the bank’s second-largest shareholder with a stake of more than 7 per cent.

The New York-based company has come under fire over its lack of support for climate resolutions in the past. In the year to June 2020, it voted for just 6 per cent of environmental proposals filed by shareholders globally, down from 8 per cent in the previous year, according to Proxy Insight, a data provider.

But the asset manager said in December that supporting investor resolutions will play an “increasingly important role in our stewardship efforts”. Since then, it backed climate resolutions at companies including National Australia Bank and ANZ Bank. The fund house also began voting against the re-election of directors over climate change concerns last year.

Many pension funds and providers have become increasingly concerned about the risks of climate change, with some such as Aegon committing to ensuring all of the default funds offered to savers are net carbon neutral by 2050.

Aegon, which is a client of BlackRock, said it was engaging with its fund managers to “provide enhanced lower carbon solutions and to influence the companies they invest in help achieve this goal”.

The resolution at HSBC was filed by Amundi, Man Group and 13 other big investors, as well as 117 individual shareholders. HSBC, which is Europe’s second largest financier of fossil fuels, according to the Rainforest Action Network, has said it plans to become a net zero bank by 2050.

HSBC said it was “strongly committed to addressing climate change, in line with our clear ambition to align our financed emissions of our entire business portfolio to net zero by 2050 or sooner”.

Last month, Fink warned that companies that fail to quickly prepare for the transition to a low-carbon economy “will see their businesses and valuations suffer”.