World’s four largest asset managers backing fewer environmental resolutions
Vanguard, Fidelity, BlackRock and State Street all backed fewer environmental shareholder resolutions in 2022 compared to 2021, a decline that may continue as the anti-ESG wave hits US investing.
BlackRock backed 72% of environmental resolutions at energy companies in 2021 compared to just 16% in 2022, according to analysis by responsible investment NGO ShareAction.
All four of the largest asset managers (Vanguard, Fidelity, BlackRock and State Street) backed fewer environmental and social shareholder (E&S) proposals in the last year. Of the group, Vanguard, which left the Net-Zero Asset Owner Alliance last year, only backed 10% of such proposals in 2022, down from 25% in 2021 and the lowest percentage of the four.
The analysis also found that the four managers consistently voted more conservatively than their proxy advisors such as Institutional Shareholder Services (ISS) and Glass Lewis recommended.
ISS recommended that managers vote in favour of 75% of the resolutions in the ShareAction dataset for 2022, while Glass Lewis recommended that managers vote in favour of 42%. These recommendations were largely in line with the percentage the proxy advisors recommended in 2021.
The ShareAction report stated: “These asset managers’ voting performance is inconsistent with their public climate commitments. Moreover, these managers’ voting performance is inconsistent with the public climate commitments of many pension fund clients, which will be of concern to underlying members of those pension schemes.”
BlackRock’s reduction in climate resolutions at energy companies is much larger than the change in its average support for environmental resolutions across all other sectors, which fell from 43% in 2022 to 33% in 2021.
Responding to the ShareAction report, a spokesperson for BlackRock said: “BlackRock Investment Stewardship (BIS) analyses each resolution on a case-by-case basis and votes, where authorised, to advance our clients’ long-term financial interests. The recommendations of proxy advisors are but a single data point in BIS’ overall evaluation. Last proxy season, enabled by revised SEC [Securities and Exchange Commission] guidance, we observed a marked increase in more prescriptive E&S shareholder proposals, resulting in lower market-wide support.
“Of the E&S shareholder proposals BIS did not support, the majority were because the company had substantially implemented or was already making notable progress on the issue being addressed.”
Of the 252 shareholder resolutions on which asset managers were scored and ranked, Impax ranked highest with an environmental score of 100%, followed by BNP Paribas Asset Management and Candriam, which both scored 97%.
If there is even slight reluctance about ESG in the US, we may well see companies and investors in other markets rethink or slow down their climate plans.
Lack of climate engagement
According to ShareAction, six action-oriented resolutions which request companies to adopt policies and set targets rather than solely disclose information would have passed with support of the largest asset managers. This included for energy companies Chevron, ConocoPhillips, Phillips 66 and Valero to set Paris-aligned greenhouse gas emission reduction targets.
The ShareAction report also anticipated that the support of the largest asset managers for environmental resolutions may deteriorate yet further in 2023, as a response to the anti-ESG movement gripping parts of the US. This month, the state of Kentucky warned 11 large financial institutions including Schroders, BlackRock and JPMorgan Chase that they will be subject to divestment if they continue to “boycott” fossil fuel companies.
Speaking to Net Zero Investor, Luma Saqqaf, chief executive of Ajyal Sustainability Consulting, said of the anti-ESG movement in the US: “If there is even slight reluctance about ESG in the US, we may well see companies and investors in other markets rethink or slow down their climate plans.
"It’s sad – why in 2023 are we still asking if sustainability positively impacts business value? But the anti-ESG movement is making people wonder, so a lot of companies who are sitting on the fence may think: ‘If I want to attract investors from the US, how far should I go with my ESG strategy?”
Earlier this month, a coalition of shareholders including Legal and General Investment Management (LGIM) and HSBC Asset Management submitted a shareholder resolution at the world’s largest coal trader, Glencore, seeking transparency on how the company’s thermal coal production aligns with Paris Agreement climate goals.
