INSIGHT by ShareAction
New research published by ShareAction has exposed that the world’s largest asset managers are blocking progress on environmental and social issues.
The fourth edition of ShareAction’s Voting Matters report reveals how 68 of the world’s largest asset managers voted on 252 shareholder resolutions tabled to address environmental and social crises. Some of the key findings include:
〉49 additional resolutions addressing urgent environmental and social issues would have received majority support if three of the largest asset managers had voted for them;
〉The four largest asset managers in the world voted for significantly fewer climate and social resolutions than they did in 2021;
〉Members of the Net Zero Asset Managers Initiative (NZAMi) and Climate Action 100+ (CA100+) failed to back a third of climate resolutions on average;
〉Overall votes for environmental and social resolutions increased from 60 per cent in 2021 to 66 per cent in 2022, though support from asset managers in the US and UK remains stagnant, with significant increases only seen in Europe.
The support of BlackRock, Vanguard, and State Street, worth $23 trillion in assets they manage, would have resulted in successful resolutions to secure paid sick leave for all 270,000 global employees at TJX department stores, owner of TK Maxx in the UK, a company with a net income of $3.3 billion.
It would also have secured disclosures from Amazon around how the company is protecting the freedom of association of its employees, including their right to unionise. With majority support, energy companies such as Chevron, ConocoPhilips and Valero would have been encouraged to set targets for reducing their greenhouse gas emissions in alignment with the net zero goals of the Paris Agreement, a critical step for averting the climate crisis.
Claudia Gray, Head of Financial Sector Research at ShareAction said:
“Most of the world’s largest asset managers are not consistently using their voting rights to address the multiple environmental and social crises the world is facing.”
“Asset managers must strengthen their voting policies, ideally through a commitment to ‘comply or explain’, meaning default support for resolutions with positive environmental and social impacts, and issuing a public explanation when votes are not cast in favour.”
“Policymakers must also step up in legislating to enhance proxy voting transparency and improve accountability for asset managers whose track record on voting is at odds with their sustainability claims.”
“As we can see from encouraging progress in Europe, change is possible. The data clearly shows that there is no intrinsic link between the size of an asset manager and voting progressively on pressing issues like climate change, human rights, or public health.”
| Four biggest asset managers’ voting performance inconsistent with public climate commitments
On average, the four largest asset managers (BlackRock, Vanguard, Fidelity Investments and State Street) supported 20 per cent of resolutions, compared to 32 per cent in 2021. Importantly, all four voted more conservatively than the world’s largest proxy voting advisors Institutional Shareholder Services (ISS) and Glass Lewis who recommended voting in favour of 75 and 42 per cent of resolutions in the dataset respectively.
Though some asset managers cited the increased number and lower quality of resolutions in 2022 as the reason for the decline, the report notes the importance of the high-profile ESG backlash taking place in the US as well as the evolution of resolutions from more straightforward disclosure asks to addressing the urgent issue of executing the energy transition.
The energy sector in general saw a large decline in resolution support: notably BlackRock backed 72 per cent of environmental resolutions at energy companies in 2021 compared to just 16 per cent in 2022. This may be explained by unwillingness from some investors to challenge energy companies given record profits following the war in Ukraine, which resulted in greater dividends and buybacks for shareholders.
| NZAMi and CA100+ members vote against a third of climate resolutions
Asset managers in the world’s largest investor initiative on climate change, CA100+, tended to vote more favourably for climate resolutions than non-members, supporting 68 per cent versus 51 per cent, though still failed to support a third of climate resolutions in the sample.
Members of the Net Zero Asset Managers initiative (NZAMi) supported just 63 per cent of climate resolutions by comparison with 61 per cent backed by non-members. This throws into question whether either initiative is meaningfully ensuring members are using their voting rights to drive action on climate change.
Ten asset managers in NZAMi, including BlackRock, Santander Asset Management and Swedbank Robur, failed to back over half of climate resolutions in the sample. In contrast to these laggards, several large asset managers voted for more than 90 per cent of climate resolutions, including Achmea Investment Management, Amundi Asset Management and CANDRIAM.
| European asset managers race ahead
There is a clear regional divide in asset manager voting behaviour: European asset managers backed on average 81 per cent of proposals in 2022 compared to 69 per cent in 2021. US and UK asset managers on average showed only a 1 per cent increase.
This improved performance coincides with the strengthening of EU legislation on ESG reporting, with the EU Shareholder Rights Directive having come into force in September 2020, requiring managers to report on their shareholder engagement and investment strategies. Currently no such mandatory reporting legislation around ESG exists in the US. A widening gap in client expectations on climate may also be driving the divergence between European and American voting trends.
To read the report in full, please click here.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.