Leading asset managers have come under fire for blocking progress on environmental and social issues, new research claims.
The fourth edition of ShareAction’s Voting Matters report reveals how top asset managers voted on 252 shareholder resolutions tabled in addressing environmental and social issues in the 2022 proxy season.
ShareAction concluded that 49 resolutions addressing urgent environmental and social matters would have received majority support if the largest asset managers had voted for them.
It also highlights that the four largest asset managers – BlackRock, Vanguard, Fidelity and State Street – voted for fewer climate and social resolutions than they did in 2021: supporting 20% of resolutions in 2022, compared to 32% in 2021.
All four, ShareAction said, voted more conservatively than the largest proxy voting advisers Institutional Shareholder Services and Glass Lewis, who recommended voting in favour of 75% and 42% of resolutions, respectively.
In addition, members of the Net Zero Asset Managers Initiative and Climate Action 100+ failed to back a third of climate resolutions, on average – which could raise questions about the purpose of such organisations.
Though ShareAction noted that some asset managers cited the increased number and lower quality of resolutions in 2022 as the reason for the decline.
Which does explain one anomaly: that the overall votes for environmental and social resolutions increased from 60% in 2021 to 66% in 2022.
A spokesperson for BlackRock told portfolio institutional: “Last proxy season, enabled by revised SEC guidance, we observed a marked increase in more prescriptive environmental and social (E&S) shareholder proposals, resulting in lower market-wide support. Of the E&S shareholder proposals BlackRock Investment Stewardship did not support, the majority were because the company had substantially implemented or was already making notable progress on the issue being addressed.”
A Vanguard spokesperson offered a similar explanation: “In 2022, we observed an evolution regarding the nature of certain proposals’ requests for company action particularly on environmental and social matters. Vanguard’s Investment Stewardship team engaged with company boards on these issues and analysed shareholder proposals on a case-by-case basis.
“After thorough assessment of individual social or environmental-related shareholder proposals, we determined that many were overly prescriptive in dictating company strategy or operations, and/or lacked a clear link to material risks and shareholder value at the company in question.”
Delving into specific voting examples, ShareAction said the support of top asset managers would have resulted in successful resolutions to secure paid sick leave for all 270,000 global employees at TJX, a department store owner trading as TK Maxx in the UK which has a net income of $3.3bn (£2.7bn).
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.
In general, the energy sector saw a large decline in resolution support.
ShareAction offered an interesting explanation to this, putting it down to a possible unwillingness by some investors to challenge energy companies given record profits following the war in Ukraine, resulting in greater dividends and buybacks for shareholders.
Regional divide
ShareAction also revealed a regional divide in asset manager voting behaviour. European asset managers backed on average 81% of proposals in 2022 compared to 69% in 2021, but US and UK asset managers, on average, showed only a 1% 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 2020, requiring managers to report on their shareholder engagement and investment strategies.
Currently no such mandatory reporting legislation around ESG exists in the US.
Claudia Gray, head of financial sector research at ShareAction, said: “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.”
Portfolio institutional contacted Fidelity and State Street for comment.
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