Dive Brief:

• BlackRock’s latest investment stewardship report, which outlines the firm’s engagement priorities for 2024, dropped references to “global warming” and companies aligning their business models to a “range of climate-related scenarios,” including limiting global warming to “well below 2°C” — guidance that has been mentioned in previous years.
• Though the asset manager mentioned “climate and natural capital” as an engagement priority in Thursday’s report, it said it was focused on how companies were “adapting to strengthen their financial resilience” against an ever-changing macroeconomic and geopolitical backdrop. 
• The firm’s language on corporate sustainability and climate change in the report mirrored statements it made in this month’s fourth-quarter earnings report, which identified an “increasing focus from stakeholders regarding ESG matters” as a risk factor that could potentially have a material impact.

Dive Insight:

BlackRock said in the report it “does not tell companies what to do.” Rather, it is focused on highlighting themes that are “relevant and a source of material business risk or opportunity.”

On climate and natural capital, the asset manager said its role is to help clients navigate investment risk and opportunities — not to “engineer a specific decarbonization outcome in the real economy.” The firm stressed its engagement on climate is only due to the financial impact clients may experience. As companies steer through material climate-related risks and start adapting to a low-carbon transition, the shift may have a ripple effect on clients’ investment outcomes and financial well-being, according to BlackRock.

Despite its reduced language on ESG-related topics, the firm said long-term investors can make better informed investment decisions when companies share their approaches to “governance, strategy, risk management, and metrics and targets, including industry-specific metrics.” 

The report said that though nature-related disclosures have historically been limited and difficult to compare across companies, frameworks such as the International Sustainability Standards Board and Taskforce on Nature-related Financial Disclosures provide a “useful guide” to prepare such disclosures.

BlackRock, the nation’s largest asset manager, has faced intense criticism in recent years from both ends of the political spectrum over its stance on ESG issues. Consequently, the firm has diluted its position on the matter, not just in terms of corporate language used in reports, but also in terms of investment decisions. Last year, the asset manager reported supporting a smaller percentage of environmental and social proposals in 2023, with its outsized role helping lead to a falling approval rate of ESG proposals.

Aside from ending up on the divestment list in several conservative-leaning states such as Texas and Florida, BlackRock has also been the target of legal scrutiny. The asset manager was sued by the state of Tennessee in December for allegedly misleading consumers about the scope and effects of its ESG activity and released conflicting statements regarding ESG’s influence over its business decisions. The same month, the House Judiciary Committee subpoenaed BlackRock, State Street and two other firms for documents that would determine whether the companies’ climate-related efforts violated federal antitrust laws.