End of Week Notes
Note to Asset Managers: Your Proxy Votes Matter
In the days between last week’s Global Climate Action Summit in San Francisco and next week’s Climate Week NYC, let’s take a look at a report on how some of the world’s largest asset managers voted their proxies on climate-related shareholder proposals at U.S. companies in the past year.
Given how much attention large institutional investors and asset managers have been giving to climate change and their growing levels of support for shareholder proposals related to climate in recent years, I would have expected more good news when I opened up this report from the 50/50 Climate Project using data collected by FundVotes.
And indeed, the report’s top-line finding that the world’s 13 largest asset managers supported, on average, 42% of climate change proposals is encouraging. Legal & General, Goldman Sachs, and PIMCO each supported at least 75% of climate proposals, and Fidelity got more involved this year, supporting 58% — good for them.
But digging into the numbers, I find a less-encouraging story. State Street (38%), Vanguard (33%) and BlackRock (23%) exhibited considerably less support, while American Funds/Capital Group supported only 13% and Amundi/Pioneer none.
BlackRock and other asset managers will tell you that they prefer to engage privately with companies and to vote against management for shareholder proposals only when engagement has been ineffective. That’s a policy that may make sense when the engagement topic has to do with idiosyncratic management issues of concern to a large investor, as both parties may prefer not to air their disagreements in public through a vote against management, except as a last resort.
But that approach should change when it comes to major systemic issues like climate change and political spending, which is also covered in the 50/50 Climate Project report. It makes far more sense in these cases for asset managers to vote in favor of shareholder resolutions to clearly signal to a company — and to other companies and to the asset managers’ own investors — that they believe the issue is important and how a company is addressing it is of relevance to investors.
Asset managers shouldn’t worry so much about offending company management; they should worry more about making sure company management understands the gravity of these issues.
The 50/50 Climate Project report covers political spending resolutions in addition to climate change resolutions because the two are connected. Many of the same companies that claim to be working hard to reduce their carbon footprint are also funding political lobby groups that deny climate change, support the Trump Administration’s anti-environmental policies, and favor weakening shareholder’s ability to propose resolutions.
Yet eight of the 13 asset managers in the 50/50 Climate Project report opposed every shareholder proposal having to do with disclosure of political expenditures. Legal & General and PIMCO, by the way, supported all such proposals they voted on.
More asset managers are taking engagement around sustainability issues seriously, and rightfully so, but the way they vote their proxies matters and is likely to draw more attention in the future.
