Siemens has been criticised by its largest external shareholder for failing to consider properly the “breadth of risks” it faces, as the German industrial group comes under intense scrutiny for its involvement in an Australian coal-mining project.
In BlackRock’s first intervention since it issued a policy on sustainability last month, the $7tn asset manager said Siemens’ management needed to step up their risk assessments around environmental, social and governance issues.
An €18m contract to provide rail signalling systems for the Carmichael site in Queensland led to co-ordinated international protests and widespread calls for Siemens, which often touts its green credentials, to rip up the agreement.
In its decision to publicly rebuke one of Europe’s largest industrial groups, BlackRock is hoping to send a message that the asset manager is taking a tougher line with companies it believes are not taking sustainability risks seriously enough.
“While [Siemens] followed its internal review process for the project, it is nevertheless clear that it requires a more thorough review of the potential risks, including ESG risks, presented by future projects,” the asset manager said.
BlackRock provided the rare commentary on its engagement with Siemens following the German group’s annual meeting in Munich on Wednesday. The event was dominated by several speeches from irate institutional investors, as well as teenage climate activists from Germany and Australia.
Siemens’ chief executive Joe Kaeser, who has said that, in hindsight, the company should never have signed the deal, told attendees that management “failed to see the overall picture”.
BlackRock’s decision to comment on Siemens is part of its efforts to provide greater transparency as well as recognition of heightened global interest in the merits of new fossil fuel projects such as the one being led by Adani in Queensland.
The Siemens meeting offered BlackRock, which has been accused of failing to match rhetoric with action, an opportunity to apply pressure on management. But although no climate-related resolutions were put to a vote, the investment company is likely to face criticism for not taking a tough enough stance after it backed all management resolutions at the meeting.
On the eve of Siemens’ meeting, protesters had targeted BlackRock’s Frankfurt headquarters, urging the asset manager to use its votes to rebuke the company’s bosses. A large black rock representing coal was ignited by the protesters in front of banners proclaiming “Stop Adani” and “BlackRock: your assets are on fire!”
Ahead of the meeting, David Ritter, chief executive of Greenpeace Australia Pacific, said: “Unless BlackRock wants to be remembered as the coal that stoked the bushfire crisis, it must lead by example and fix its own portfolio, and demand Siemens Energy withdraw from infrastructure support for not only the catastrophic Adani coal mine, but all fossil fuels completely.”
BlackRock boss Larry Fink said in January that the asset manager would put sustainability at the centre of its investment process because of the financial risks of climate change. It announced plans to dump some coal holdings, require businesses to disclose climate-related risks and said it would disclose more information on its conversations with businesses over climate change, as well as provide more timely updates on its voting record on climate change and other issues.
The New York fund group last month joined the Climate Action 100+ group, which urges big businesses to reduce their environmental impact.
Mr Fink, speaking at Davos last month, said his role at BlackRock was to help clients prepare for the redistribution of capital, adding he would do that as a “capitalist” and not an “environmentalist”.
In April last year, BlackRock refused to back the board of German pharmaceutical group Bayer at the company’s annual meeting, in a largely symbolic protest over its handling of a merger with pesticides-maker Monsanto. Legal claims in the US had wiped tens of billions of dollars from Bayer’s value in the run-up to the meeting.