ESG Update: Large Firms Lead Industry Toward Net Zero; Other ESG Priorities

A comprehensive article from lawyers from Cadwalader, Wickersham and Taft provides an update of the current ESG landscape as it relates to the asset management industry. The report focuses on global industry initiatives, disclosure frameworks, reporting obligations, potential pitfalls, and the push for greater transparency concerning sustainable investing. The authors point to the large institutional asset managers leading and advancing climate change initiatives and agendas and exerting influence beyond the asset management industry, including BlackRock, Vanguard and State Street. The annual letter to CEOs from Laurence Fink, BlackRock’s Chairman and CEO, has largely been devoted to climate change in recent years the authors note, and “is virtually required reading for large swaths of business executives.” In Fink’s 2022 letter, net zero initiatives were a major focus along with stakeholder capitalism and BlackRock’s efforts to empower shareholders to vote their own proxies. According to Fink’s letter, “every company and every industry will be transformed by the transition to a net zero world.” Fink asserted that divesting from entire sectors—or simply passing carbon-intensive assets from public markets to private markets—will not get the world to net zero.  Indeed, several media reports including from Institutional Investor, note that “the asset management industry is diving head first into the net zero space.” Institutional Investor reported that in December 2020, a group of 30 asset managers signed the Net Zero Asset Managers initiative, whose goal is net zero greenhouse gas emissions by 2050. The pledge currently has more than 200 signatories, representing over $57 trillion in assets under management. The Wall Street Journal in a separate report noted that the banks, pension funds, insurers, asset managers and others who have signed up to Net Zero Asset Managers aim to make significant progress in the next five years. With respect to shareholder voting, BlackRock’s Fink discussed the firm’s strategies to empower shareholders, including an initiative to use technology to give more BlackRock clients the option to have a say in how proxy votes are cast at companies. BlackRock currently offers the voting option to certain institutional clients. “We are committed to a future where every investor—even individual investors—can have the option to participate in the proxy voting process if they choose,” Fink’s letter said, adding that “there are significant regulatory and logistical hurdles to achieving this today, but we believe this could bring more democracy and more voices to capitalism.”