BlackRock has released its top engagement priorities for 2021, building on its previously released
Stewardship Expectations. The priorities paper provides additional detail on how BlackRock plans to engage with companies this year and notes that its engagement priorities map with the
UN Sustainable Development Goals (17 global goals such as Gender Equality, Clean and Affordable Energy, etc.)
BlackRock’s five top priorities for 2021 are discussed below:
- Board Diversity and Effectiveness. BlackRock expects companies to disclose their approach to ensuring board diversity along with a demographic profile of the board. The investor requires access to a non-executive director for direct engagement when deemed necessary to assess how effectively the board is overseeing management.
- Climate Risk. As clearly stated in Larry Fink’s 2021 letter to CEOs, BlackRock expects companies to disclose how they align to a “net zero” goal and encourages disclosures on sustainable use and management of natural capital.
- Strategy and Resilience. Companies should clearly explain their purpose, approach to financial resilience, and measures of value creation.
- Incentives Aligned With Value Creation. BlackRock expects executive pay to be aligned with 3-5 year TSR or returns on invested capital and may vote against compensation committee members where a company has not demonstrated the connection between strategy, long-term value and plan design.
- Impact on People. BlackRock advocates for disclosure of workforce demographics, either through the EEO-1 report or SASB’s industry-specific human capital metrics standard. The investor is asking for evidence of “board oversight, due diligence, and remediation of adverse impacts to people arising from company business practices.”
BlackRock’s engagement strategy is based on prior engagement with a given company, thematic priorities, and the presence or absence of substantive issues in a given year. Importantly, the investor noted that this year, it will be more likely to support sustainability-related shareholder proposals without waiting for engagement given the “need for urgent action.”
