BlackRock and Vanguard lead steep drop in support for U.S. climate resolutions

Despite a jump in shareholder resolutions this proxy season, support for climate and net zero-related motions experienced a steep drop in the U.S. this year, with BlackRock and Vanguard key drivers of this downward trend, according to a new report shared with Net Zero Investor today.

The number of shareholder resolutions proposed within U.S. companies grew by 18% in the 2023 proxy year to a total of 616, up from 522 in 2022.

This followed an already relatively strong jump of 16% a year earlier, from 449 to 522, according to the Morningstar data, which pointed out this increase followed the SEC's decision to broaden the definition of permissible shareholder resolutions addressing ‘significant social policy issues.’

The recent increase included many resolutions on environmental topics that asset managers rejected as 'prescriptive' or 'redundant', the researchers wrote.

"We saw lower support for E&S resolutions in 2023: The number of resolutions on environmental and social topics increased by 23% in 2023 to 337, from 273 in 2022," they stated.

"However, there was a sharp fall in shareholder support for E&S resolutions to an average of 20% in the 2023 proxy year, from 30% in 2022."

BlackRock, Vanguard and State Street

BlackRock and Vanguard sharply reduced their support for key resolutions in 2023, the report pointed out.

BlackRock supported 38% of key resolutions in the 2023 proxy year, down from 50% in 2022, while Vanguard backed only 8% of key resolutions in 2023, down from 23% in 2022.

State Street’s support increased, however. The firm supported 66% of key resolutions in 2023, up from 59% in 2022. 

"This means that there is even wider divergence between the three firms’ voting patterns than we observed earlier this year," said Lindsey Stewart, director of stewardship investment research at Morningstar.

Stewart pointed out that the number of key E&S resolutions, which are proposals supported by at least 40% of a company’s independent shareholders, almost halved in 2023 to 53, from 102 last year.

“The 2023 proxy season findings really illuminate the debate around the quality of resolutions," said Stewart.

"The market is questioning the value of most resolutions in a way which they didn't before.”

“With changing attitudes and growing politicisation around the climate agenda in the US creating divided opinions on the subject, it is interesting to note that the number of environmental key resolutions fell from 22 in the 2022 proxy year to 12 in 2023, the lowest count since 2020," Stewart added.

"This coincides with incoming regulation set to fill many of the reporting and governance gaps on climate that were previously filled by shareholder resolutions," he concluded.

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