BlackRock hires new firm for advice amidst sustainability criticism. Expert says it’s too late.

BlackRock made headlines on Tuesday by announcing a partnership with a third proxy advisory firm to expand its clients’ investment options. This move comes in response to criticism that the asset manager prioritizes ESG (environmental, social, governance) principles over its fiduciary responsibilities.

Joud Abdel Majeid, the global head of BlackRock Investment Stewardship, emphasized the company’s commitment to innovation and providing clients with more choices in the proxy voting process. “We’re pleased to add a third proxy advisor to our platform and offer clients the ability to customize their voting guidelines to align with their specific goals,” Majeid stated.

As part of this partnership, BlackRock will be integrating Egan Jones, a ratings firm based in Delaware County, Pa., as its third proxy adviser starting in July. Sean Egan, the founder of Egan Jones, was previously recognized as the top predictor of the 2008 financial crisis by Fortune magazine.

With the addition of Egan Jones, clients will have access to up to 16 distinct voting guidelines across three proxy advisor services in addition to BlackRock’s benchmark policy. The majority of BlackRock’s equity investment clients continue to entrust the company’s investment stewardship team with the responsibility of voting according to BlackRock’s benchmark policy.

BlackRock’s collaboration with Egan Jones is seen as an effort to address concerns about political influences on investment decisions. Dr. Kevin Roberts, president of the Heritage Foundation, criticized BlackRock for what he sees as a delayed response. Roberts mentioned that Larry Fink, BlackRock’s CEO, may claim that ESG has been politicized but insisted that ordinary Americans view it as a scam.

In a recent interview with Fox Business, Fink defended BlackRock’s approach, stating that the firm remains committed to its fiduciary duties and listens to client preferences. Fink also highlighted BlackRock’s strong performance and market predictions accuracy.

BlackRock’s expansion of the ‘voting choice’ program, under the pretext of providing clients with more options, has drawn mixed reactions. While the company asserts its dedication to serving clients’ interests, critics like Roberts believe it is insufficient given the current global political landscape.

In a chairman’s letter to investors, Fink reiterated BlackRock’s responsibility to its clients and addressed the ongoing debate over ESG policies. The company indicated that it may introduce additional policies for the Voting Choice program based on client demand.

Prior to the partnership with Egan Jones, $600 billion in institutional investment assets under BlackRock’s management were part of the Voting Choice program. The company aims to adapt to evolving client preferences and interests in the investment landscape.

Overall, BlackRock’s strategic collaboration with Egan Jones reflects its ongoing efforts to enhance client services and provide diverse investment options amidst growing scrutiny over ESG practices and fiduciary responsibilities. As the financial industry continues to evolve, BlackRock remains vigilant in addressing feedback from stakeholders and adapting to meet the changing needs of its clients.