Blackrock has released its engagement priorities for 2017/18, highlighting firm approaches to technology changes in the workforce as a key engagement issue.
Blackrock, the world’s largest asset-manager, has issued a list of areas that it will be focusing on in its engagement with companies over the year ahead.
Included in its list of five priority issues is human capital management, which Blackrock identifies as a source of potential competitive advantage for firms.
“In light of evolving market trends like shortages of skilled labor, uneven wage growth, and technology that is transforming the labor market, many companies and investors consider human capital management a competitive advantage”, says Blackrock.
“ In our engagement on these factors, we seek to ensure companies are adopting the sound business practices likely to create an engaged and stable workforce. As part of the engagement, we are interested to know if and how boards oversee and work with management to improve performance in these areas. Such engagement also provides a lens into the company’s culture, long-term operational risk management practices and, more broadly, the quality of the board’s oversight.”
Blackrock has also identified direct governance issues that it will be focusing on through its investor engagement teams, including:
- Board composition, including diversity, flagging potential activism if progress is slow
- Board evaluation, including understanding how the skills and performance of the board are reviewed and refreshed
- “Climate competence”, for directors of companies in sectors that are significantly exposed to climate risk, demonstrating the entire board is fluent in climate risk impacts on the business
- Long-termism in corporate strategies, with annual refresh and reporting of milestones and short term accountability measures
- Executive remuneration, with a focus on its link to long-term corporate strategy.
Climate risk disclosure is identified as a substantive area of focus for the global asset manager, a move that is likely to drive greater focus on climate change risk disclosure across the board. The recommendations of the Financial Stability Board Task Force on Climate-related Finanicial Disclosure.
“We believe that enhanced, meaningful disclosures are an important step towards building understanding of the impact on individual companies, sectors and investment strategies. Given climate risk is a systemic issue, we believe disclosure standards should be developed that are applicable to listed companies across each market and, ideally, that are globally consistent.”
“Over the course of the coming year, we will engage companies most exposed to climate risk to understand their views on the TCFD recommendations and to encourage them to consider using this reporting framework as it is finalized and subsequently evolves over time.”
Blackrock has noted that many of its engagements are triggered by companies not providing sufficient information in their disclosures, and encourages firms to review and consider their reporting on the priority issues it has identified. The influential asset manager has sounded a warning about potential voting activism on issues where it is not satisfied with company responses.
“We seek to engage in a constructive manner. Our aim is to build mutual understanding and ask probing questions, not to tell companies what to do. Where we believe a company’s business or governance practices fall short, we explain our concerns and expectations, and then allow time for a considered response,” says Blackrock.
“As a long-term investor, we are willing to be patient with companies when our engagement affirms they are working to address our concerns. However, our patience is not infinite - when we do not see progress despite ongoing engagement, or companies are insufficiently responsive to our efforts to protect the long-term economic interests of our clients, we will not hesitate to exercise our right to vote against management recommendations.”
Access the full Blackrock statement here
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