BlackRock has vowed to back more shareholder resolutions on climate and social issues at annual meetings, as the world’s largest asset manager faces growing pressure to use its clout to change companies’ behaviour.

The $7.8tn asset manager has faced years of criticism after overwhelmingly backing management rather than voting for shareholder proposals on issues such as climate change.

However, BlackRock said on Thursday that supporting investor resolutions will play an “increasingly important role in our stewardship efforts around sustainability”. The shift in approach followed a “significant review” of its policies around AGM voting and discussions with companies, the New York-based group added.

The move is likely to have significant repercussions across the corporate world given BlackRock is a large shareholder in many public companies.

Sandy Boss, head of investment stewardship at the asset manager, said BlackRock had traditionally given companies the “benefit of the doubt” that they treated issues such as climate change seriously, but there is a “sense of urgency now” that businesses must take faster action.

“The dialogue with companies has changed so much in the course of this year,” said Ms Boss, who joined the group in May and oversaw the review. “The pandemic risk has brought social risk to the forefront. Climate risk is at the forefront,” she said.

The pledge comes less than a year after BlackRock chief executive Larry Fink said that sustainability would be at the heart of the group’s investment strategy, warning that issues such as global warming posed huge financial risks for companies and investors.

Since then, however, critics have accused the asset manager of hypocrisy, after it failed to back several key climate resolutions in Australia and elsewhere at annual meetings this year. The asset manager supported fewer environmental votes at shareholder meetings in the 12 months to June compared with the previous year, according to data from Proxy Insight.

Ms Boss said BlackRock has traditionally focused on engaging privately with companies as well as voting against directors.

But she added that BlackRock was now more willing to support shareholder resolutions because the wording of proposals has become “more specific”, such as asking for a plan on how a company would manage climate risks.

As part of the review, BlackRock also had found a “really strong relationship” between a proposal getting the support of 30 per cent to 50 per cent of shareholders and companies taking action to address concerns, Ms Boss said.

The pledge was given a cautious welcome by critics.

“It’s clear that BlackRock’s previous vague ‘engagement’ was not changing companies’ approach to climate action,” said Diana Best of the BlackRock’s Big Problem campaign, a network of climate activist groups.

“We hope that this latest announcement is the beginning of BlackRock making clear that a company’s failure to move toward decarbonisation will come with real consequences,” she added.

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Ms Boss cautioned that BlackRock was not “pressing the button to support all climate resolutions”, but “what we will do is support a proposal if it is reasonable”.

The asset manager has not set any targets for the number of resolutions that it will support.

From next year, BlackRock will also ask companies in the US, Europe, the Middle East and Africa to disclose ethnic diversity statistics, with Asian companies being asked to disclose information about gender diversity. Ms Boss warned that BlackRock could start voting against companies that are not making efforts to ensure boards, management and workforces are reflective of the societies in which they operate. 

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