Proxy voting on environmental and social resolutions this year has proved a sticky issue, at least for some asset managers. Firstly, looking at the broader voting trends, 2024 has been something of an interesting year for ESG-related votes.
Governance proposals gained greater support, but for the environmental and social segments, it is complicated, said Lindsey Stewart, director of stewardship research and policy at Morningstar Sustainalytics.
Stewart identified ESG shareholder resolutions are still growing in number, but for the first time, the growth is primarily driven by ‘anti-ESG’ proponents.
There has though been a rebound in support for governance-focused proposals, from 30% in 2023 proxy year to 35% this year. Resolutions seeking to bolster shareholder rights enjoyed particular success.
Highlighting the reason behind this approach, Blackrock revealed in its Global Voting Spotlight: “In the 2023-24 proxy year, investors – including Blackrock – supported more shareholder proposals addressing corporate governance issues than in previous years. Generally, these proposals focused on introducing provisions to further strengthen the rights of minority shareholders, such as Blackrock’s clients.”
Blackrock’s support for all shareholder resolutions rose slightly to 11% in the 2023 proxy year, from 9% last year.
There has though, overall, been a decline in shareholder support for environmental and social resolutions, which continued in 2024.
Average support for E&S resolutions fell to 16% this year from 19% in the 2023 proxy year.
Underlying shareholder backing for key E&S resolutions, those supported by at least 40% of a company’s independent shareholders, remained at 2023 levels despite the continuing broader decline.
Large asset managers appear to have continued their withdrawal of support for E&S proposals in 2024, according to Morningstar, driving growth in a cohort of ‘near miss’ resolutions with between 30% and 40% independent shareholder support.
Continued growth in the overall volume of resolutions with falling average support is likely to prompt questions about the quality of proposals being filed, as well as the future of the entire shareholder resolution process, from institutional investors and companies.
One way to look at what has happened is to suggest that the largest asset managers appear to have continued a trend to rein in their support for some ESG-related resolutions.
Overly prescriptive
Asset management behemoth Blackrock came in for some stick after its Global Voting Spotlight revealed that it only supported around 4% of the shareholder proposals it voted on in the proxy year to the end of June, compared with around 7% in 2023 and 22% in 2022.
In the spotlight, Blackrock highlighted its approach: “Like last year, investors found the majority of these proposals [focused on climate and natural capital risks] to be overly prescriptive, lacking economic merit, or asking companies to address material risks they are already managing. As a result, these proposals continued to receive low support from shareholders, including Blackrock.”
But Felix Nagrawala, financial sector research manager at responsible investment campaign group Share Action, is not impressed. “Blackrock’s voting record this year is disappointing but not unexpected. Our research has shown Blackrock has repeatedly been one of the worst performers in recent years and seen its support of resolutions plummet.”
And he added: “While they say the resolutions are too prescrip- tive and lack merit, in reality, we found most resolutions – three quarters in 2023 – were just asking for more disclosure – hardly too much to ask for companies when it comes to systemic risks like climate change that is in the long-term interests of its clients.”
No support
Another big asset manager, Vanguard, surprised many with its announcement that it supported no shareholder resolutions on E&S themes.
“Vanguard’s announcement that it supported precisely zero shareholder resolutions on environmental and social themes in the 2024 proxy year is certainly striking, but it doesn’t surprise those of us who have been watching asset managers’ voting patterns closely,” said Morningstar’s Lindsey Stewart.
Stewart then tried to be put the proxy-voting trend, at least among the bigger assets managers, in a wider context.
“Amid ongoing pushback on all things ESG from more conservative elements of the political spectrum, Blackrock, Vanguard and other large asset management firms have increasingly emphasised a focus on financial materiality and traditional corporate governance,” he said.
“This emphasis has manifested in recent proxy voting decisions that dissent from company boards’ recommendations with increasing rarity, meaning much lower support for shareholder proposals,” Stewart added.
Comments