IN-DEPTH: Q&A with Sierra Club Foundation on recent break with BlackRock
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An interview with Paul Rissman, an emeritus board member of the Sierra Club Foundation, on the group's recent decision to break away from BlackRock.
The Sierra Club Foundation recently took a decision to step away from BlackRock citing an effort to safeguard the group's assets. Can you expand on what drove you to that decision?
In 2020, BlackRock CEO Larry Fink came out and said climate risk is financial risk. That trajectory was going well until about 2022, which was the high point of large asset manager activism on the subject, then it completely reversed.
There is a litany of actions that concern us. This includes the fact that BlackRock has pulled back on its support for environmental and social shareholder resolutions and has also nominated the CEO of Saudi Aramco to its board.
It has tried to do a couple of things to make itself a little bit more of a systemic steward. For example, in July of 2024, it came out with its decarbonization stewardship platform. However, given the SEC 13D-G guidance released at the beginning of this year, that doesn't even exist for U.S. companies.
The foundation wants to have a positive impact, and we want to decarbonize the economy, not simply decarbonize our portfolios, and BlackRock can't do that for us. We put them on watch three years ago and now we have finally made the transition.
What was the level of engagement with BlackRock over that period?
We've occasionally engaged with BlackRock on the topic. BlackRock used their standard line that shareholder proposals have gotten too prescriptive, which we disagree with, and that companies have gotten better, which we also disagree with.
To us, it appears that BlackRock will do whatever they feel will make them the most amount of money, whether it is for climate or against climate. We can't have a money manager that is so “other” focused when managers are supposed to have their clients’ interests in mind. We didn't think BlackRock did, so we took action.
DMI Voting data for H1 points to a notable decline both in the volume of and support for ESG proposals. Where does this leave ESG proposals going forward? Will there be a change in strategy?
ESG proposals are in trouble, no doubt. Political backlash has definitely had an effect. Governance demands seem to be gaining traction but you're not going to get the votes for environmental and social proposals that you want. Proponents understand that and the strategy seems to be shifting.
Follow This came out with an announcement this year to pause resolutions and intensify efforts to highlight the crucial role investors play in the climate crisis.
We may not be filing as many resolutions, but we are talking a lot more to asset owners. Another example is when The Vermont Pension Investment Commission updated its guidelines to emphasize the role of proxy voting in addressing systemic risks posed by climate change and said that they might vote against directors who are not doing a sufficient job of taking account of systemic climate risk. That's significant.
Organizations like Sierra Club are starting to put pressure on public pension funds. There is more organization going on directed at asset owners because they have fiduciary responsibilities to their beneficiaries to do something about systemic climate risk, which will damage their beneficiaries’ portfolios over time. As proponents decide that it's not worth their time and effort and money to devote as much to filing resolutions as they did before, I think they're going to start working behind the scenes with asset owners and get asset owners to do more robust stewardship or get dropped like the foundation did with BlackRock.
Looking at the foundation’s history of shareholder proposals and other engagement, DMI has covered campaigns concerning Goldman Sachs and Vanguard to mention some. Do you feel they made an impact?
Campaigns like that have certainty driven awareness, especially when I consider the period since 2017. One positive concerned our engagement with many of the big banks in the U.S. over their fossil fuel financing. Some were quite receptive to our engagement. In 2024, Morgan Stanley changed its environmental and social policy statement to include a paragraph on climate justice, which was a direct result of our engagement.
Overall, there is progress still being made but many discussions are going on behind the scenes that people are not necessarily aware of.
Looking ahead to next season, do you expect to see a continued dip in shareholder proposals?
We can only speculate at this point. It's expensive to file shareholder resolutions and if you're not going to get any progress out of them, then don't bother. So, I think that trend will likely continue.
However, those in the ESG space are trying as hard as they can to figure out how to strengthen systemic stewardship. A few years ago, nobody had ever heard of systemic stewardship, but now people are talking about it much more. A lot of it is anti-systemic stewardship, but that's fine because we need to have that debate as the progressive movement thinks more and more about systemic stewardship and starts to grapple with how to make it more effective because there are hurdles. The asset owner has fiduciary obligations to their beneficiaries; they can’t just do what they want. So, the asset owners will be driving this. You just have to watch this space. Groups are innovating all the time and will continue to do so.
