Every year, BlackRock’s specialist Investment Stewardship team of over 30 dedicated professionals engages with about 1,500 companies. Such meetings may also include active portfolio managers with a holding in the company or who are considering investing. It should be noted that BlackRock’s equity investments are predominantly in index strategies so we will be a significant investor in most listed companies in each market. We engage to protect and enhance the long-term value of our clients’ investments.
We consider various inputs to inform our engagement process.
We take into account:
the significance of the issue and the actual or potential financial impact,
our ability to influence an improvement in business practices,
whether engagement would help inform our voting decision or follow-up engagements, and
management’s responsiveness to investor concerns historically.
To prioritize our engagement process, we consider:
our analysis of shareholder votes;
research by our fundamental investment teams;
< > social, and environmental research;
research by investment banks and external ESG specialists.
For each engagement, the Investment Stewardship team determines our objectives and how best to reach them. The materiality and immediacy of a given issue will generally determine the level of our engagement. We also determine with whom we should seek to engage at the company. For instance, on matters of clarification of an issue related to a vote we would most likely engage with management representatives – the General Counsel, Corporate Secretary or head of human resources. Where we seek to understand a company’s approach to its environmental and social impacts we may seek to meet with the head of corporate sustainability or a representative of the strategy team. Where we have concerns about the quality of management or of board oversight, we would seek to meet with the relevant board directors, with or without management present as appropriate.
Our approach to engagement has long been one of having a private dialogue with companies, setting out our views and any concerns and discussing ways these could be addressed. As a long-term investor, often with sizable holdings, we believe it is important to engage in a discreet manner and to build relationships with companies that will enable us to influence change over time when necessary. We have an escalation strategy such that in the first instance we will engage in private dialogue. Where we have concerns about a company’s practices, we will set out our expectations in that conversation and leave the company time to consider our feedback, making clear that we will continue to support management in our voting near term as long as we have a strong sense that progress towards addressing our concerns is being made.
Each year we identify certain priority topics for engagement, which may be our focus for several concurrent years. Examples in 2016 include cyber security, board gender diversity in markets where there is no market-set target (e.g. US) and climate-related disclosure.