Stockholm (NordSIP) – According to ShareAction’s Voting Matters 2020 report, asset managers are still not effectively using their proxy voting power when it comes to environmental and social issues. While European asset managers showed some leadership, structural constraints limited their ability to drive change at home. The report also argues that BlackRock and Vanguard are still ranked at the bottom of the scale.
The survey reviews how 60 of the world’s largest asset managers voted on 102 shareholder resolutions on climate change, climate-related lobbying, and social issues, between September 2019 and August 2020, and how they justified their voting choices.
ShareAction is a campaigning organisation pushing the global financial system to take responsibility for its impact on people and the planet, and use its power to create a green, fair, and healthy society. The report was financially supported by the IKEA Foundation, the Sunrise Project, the European Climate Foundation, Wallace Global Fund, and Lankelly Chase.
Starting with the negative, one in six asset managers did not use their voting rights at over 10% of the resolutions they could have voted on. The list includes BNP Paribas Asset Management, DWS Investment GmbH, Eurizon Capital, La Banque Postale Asset Management, Credit Suisse Asset Management LLC, Lyxor Asset Management, M&G Investment Management, Nordea Investment Management, Royal London Asset Management, and Swisscanto.
Speaking of laggards, the report finds evidence that the Big Three (Blackrock, Vanguard Group, and State Street Global Advisors) can still do more. Of the 102 resolutions considered by the study, an additional 17 would have passed if one or more of the three asset managers had changed their vote.
According to the survey, several Climate Action 100+ (CA100+) members failed to vote for climate action, although CA100+ members have better voting records on average than non-CA100+ members. Asset managers can be unwilling to vote on resolutions filed at companies they consider to be leaders, even if these companies’ climate strategies are inadequate.
“We expect companies to manage and disclose sustainability risks and to that end we leverage the widest range of stewardship tools, on behalf of our clients,” a BlackRock Spokesperson commented in relation to the ShareAction report. “We engaged more than 2,000 companies last proxy season to drive outcomes, and voted against more than 5,100 directors when our expectations were not met. We see voting on shareholder proposals playing an increasingly important role in our stewardship efforts around sustainability, and will support shareholder proposals that address necessary action on business-relevant sustainability issues consistent with delivering long-term value. For example, most recently, we supported sustainability-related shareholder proposals at AGL Energy, BHP, Procter & Gamble, Origin Energy and Chr. Hansen and have published bulletins on each of these votes providing the rationale for our vote decision and insight into our engagement with the company,” the BlackRock spokesperson concluded.
“We are committed to engaging actively with companies to help them improve their working practices related to numerous ESG criteria, including on human rights issues. We are working to implement enhanced screening protocols in line with UN global compact principles,” a representative for State Street Global Advisors told NordSIP.
Europeans Lead Abroad
The report also found that European asset managers continue to lead their US counterparts. The top 17 best performers are all based in Europe. Impax Asset Management, Aviva Investors, PGGM Investments, Man Group, Legal and General Investment Management, and NN Investment Partners voted in favour of 95% of ESG resolutions. On the other side of the pond, Northern Trust Asset Management voted for 70% of all resolutions. JPMorgan Investment Management increased its support from 9.7% of the motions last year to 51% in 2020, while the Wellington Management Company rose from 9.8% to 62%.
However, despite their better voting performances, only 6 of the 53 climate resolutions covered by the analysis were filed in Europe. This is because it is generally more difficult to introduce shareholder resolutions in Europe than in the USA, often due to higher ownership thresholds.
Disclosures and Engagement
Speaking of the complexity of voting, disclosure resolutions dominated the 2020 AGM season according to the report. 67 out of 102 resolutions that were voted on between September 2019 and August 2020 focused on disclosure. The focus is perceived to be motivated by the relatively uncontroversial nature of these proposals, which are more focused on ESG disclosures aimed at risk management rather than wholesale business reforms.
ShareAction’s analysis also noted that private engagement can serve as a deterrent to climate action. According to the study, there were several instances where “asset managers continue to abstain or vote against climate critical resolutions because of ongoing engagement with the company”. The report discusses a case study of Total SA which illustrated this paradox.
Climate and Diversity Dominate
According to the analysis, climate change initiatives are the leading type of shareholder action. Companies have started to respond to investors’ increased interest in and support for resolutions on climate-related lobbying. Banks are under pressure to act on climate change
On the other hand, there is little evidence that Social considerations are affecting voting decisions, despite rumours that the pandemic raised the profile of this factor. According to an analysis of resolutions deemed directly relevant to the COVID-19 at six companies, the correlation between support for resolutions on human rights and the effects of Covid-19 was inexistent.
At the same time, out of all the factors focusing on social issues, diversity is the most prominent. Support for diversity resolutions (77%) is higher than for those on human rights (59%) and pay gaps (43%).