World’s largest asset managers voting against stricter ESG rules at corporations

Large, American investors generally voted in favour of fewer resolutions than their European counterparts

Published by ShareAction today (17 January), the report documents a minimal increase in votes in support of these proposals across the world, particularly in the US and UK, with investors largely failing to use their ability to push the companies in which they invest to take stronger actions on topics such as climate, pollution and human rights.

The report assesses how 68 of the world’s largest asset managers voted on 252 shareholder resolutions tabled in 2022 in relation to environmental and social topics.

It reveals that the four largest asset managers – Vanguard Group, Fidelity Investments, BlackRock and State Street Global Advisors – backed fewer shareholder proposals in 2022 than they did in 2021. Vanguard Group, for example, only supported 10% of the proposals, down from 26%. BlackRock’s decrease was from 40% to 24%; Fidelity’s was from 29% to 17% and State Street’s was from 32% to 28%.

The average investor, of the 68 covered in the report, backed 66% of environmental and social resolutions, for contrast.

ShareAction’s report reveals how a lack of support from BlackRock, Vanguard and State Street ultimately meant that dozens of resolutions – 49, to be precise – did not receive majority support.  This is equivalent to 19% of all resolutions covered, up from 12% covered last year.

Companies that did not have climate-related shareholder resolutions passing due to the decisions made by this ‘big three’ group include energy majors Chevron, ConocoPhillips, Phillips 66 and Valero. In social resolutions, the absence of support from these ‘big three’ led to a resolution falling through regarding paid staff sick leave for all employees at TJX department stores. Also blocked was a requirement for Amazon to disclose how it was upholding workers’ rights to unionise.

The report does note that this trend is largely visible among investors based outside of Europe, with many major players increasing their backing for environmental and social resolutions year-on-year. European asset managers, on average, backed 81% of proposals in 2022 compared to 69% in 2021. In contrast, the year-on-year increase in the US and the UK was just 1%.

ShareAction attributes this, in part, to the strengthening of EU legislation. In 2020, the EU introduced the Shareholder Rights Directive, requiring larger asset managers to report on their shareholder engagement and investment strategies, including voting behaviour.

“As we can see from encouraging progress in Europe, change is possible,” said ShareAction’s head of financial sector research Claudia Gray.

“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.”

Majority Action

Last week, US-based non-profit Majority Action urged the Climate Action 100+ investor initiative, convening members with more than $68trn of managed assets, to better support members to vote against directors at companies failing to show climate leadership.

Majority Action assessed the proxy voting involvement of 104 Climate Action 100+ members in 2022 and found that most supported 90% or more of the ‘flagged’ directors at US-based companies in high-emission and/or hard-to-abate sectors on climate-related issues.

Some large investors including State Street and Blackrock, Majority Action claims, actually increased support for flagged directors in these cases year-on-year, despite many other smaller investors decreasing their support.

Climate Action 100+ retorted that its investor signatories “have played a significant role in accelerating the net zero journey and improving board oversight of climate-related financial risks of the focus companies”, without it setting strong proxy voting requirements.

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