The asset management industry is failing to use its voting power to push better social and environmental performance from corporates, with accusations of stagnant voting on ESG resolutions. ESG Insight interviewed Sonia Hierzig, ShareAction’s head of financial sector research.
A new report from ShareAction, a non-profit that promotes responsible investment, found that on average, the 51 asset managers assessed in both 2020 and 2021 increased their proportion of votes in favour of ESG resolutions by just 4 percentage points.
The 75 asset managers in this assessment manage more money than the GDP of the US, China and the European Union combined.
“The world’s largest asset managers continue to block efforts to make progress on environmental and social issues,” says Hierzig.
Reasons for stagnant voting on ESG resolutions
“We had a look at the rationale that asset managers gave for their votes. By far the most common reason for voting against the resolution is that the asset manager felt that the company was already doing enough or were taking steps in the right direction.
“From our point of view there is a risk that asset managers might confuse the company doing something –with the company doing enough. Or they are afraid of voicing expectations that might be considered too ambitious for the company. Another reason was that they preferred to engage with the company privately instead of voting,” Hierzig said.
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“More and more clients are interested in their asset managers’ ESG credentials. So being signed up to an initiative looks good. For some of them, it might be a little bit of a greenwashing exercise. Most asset managers do not yet recognise the urgency of the various crises society faces.”
Raising the bar
Some individual managers did show substantial improvement. Credit Suisse and Nordea increased their percentage of ‘for’ votes by 61 percentage points each, supporting 77% and 91% of ESG resolutions this year, respectively.
But many asset managers are not exercising their voting rights, with seven assessed managers voting on fewer than 60% of resolutions, according to ShareAction’s report. Five of these are members of Climate Action 100+ (CA100+).
“Not voting sends a signal to these companies that their behaviour on environmental and social issues is not of interest to their shareholders,” ShareAction’s head of finance research said.
CA100+ and NZAM initiative members voted against almost a third of environmental resolutions. Resolutions with a stronger focus on action or changing corporate behaviour struggled to achieve more than 30% shareholder support.
Eleven assessed asset managers voted against human rights-related shareholder proposals at companies supplying weapons to states engaged in conflict with a record of alleged human rights violations.
Action points and recommendations
ShareActions recommendations for asset managers include having voting policies that explicitly commit to support shareholder resolutions on Environmental, Social and Governance (ESG) issues on a ‘comply or explain’ basis.
Asset managers could also consider filing shareholder resolutions at companies who fail to make sufficient progress on ESG issues.
Asset owners have a duty to monitor the engagement activities and proxy voting records of their asset managers. Going forward, asset owners can engage with asset managers where they are falling short of expectations.
BlackRock, the world’s largest asset manager, supported 40% of the assessed resolutions this year, compared to 12% last year. But it still voted against:
- 100% (6 out of 6) resolutions on executive pay disparity
- 72% (8 out of 11) resolutions on gender pay disparity
- 100% (8 out of 8) resolutions on employee representation at board level
- 100% of resolutions on public health and tobacco (7 out of 7)
- 100% (2 out of 2) of resolutions on weapons companies
Members of CA100+ supported 72% of climate resolutions, as opposed to 54% for non-members, while NZAM members supported 70%, vs 61% for non-members.
Swedbank Robur and Santander Asset Management supported fewer than 20% of climate resolutions at companies in which they had holdings, despite being members of both NZAM and CA100+, while CA100+ member MEAG did not support a single climate resolution.
“Asset owners and investment consultants can use the information in this report to challenge asset managers, to inform the selection of managers and highlight positive trends set by leading players.
“Many asset managers have joined the net zero inititatives and make claims around their ESG credentials. This is an easily measurable way that allows us to see whether they are walking the walk.”
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