Fall-off in Support for ESG Shareholder Resolutions
Performance divide between US and EU asset managers widens under different regulatory scopes.
Asset manager support for environmental and social-focused shareholder resolutions has reached an all-time low, thanks to diminishing support from the four biggest US-based firms, according to new research by UK NGO ShareAction.
The sixth edition of ShareAction’s annual ‘Voting Matters’ report assessed 279 shareholder proposals filed during the 2024 proxy season, finding that just 1.4% (four out of 279) received majority support – down from 3% in 2023 and 14% in 2022. These proposals covered themes such as workers’ rights and climate change.
“This year, we found that performance by the asset management sector has hit a new low. The four biggest asset managers in the world are the most culpable and driving this overall fall in positive shareholder outcomes,” Felix Nagrawala, Senior Research Manager at UK NGO ShareAction, told ESG Investor.
The four biggest asset managers – BlackRock, Vanguard, State Street and Fidelity Investments – are headquartered in the US and collectively manage US$23 trillion in assets, which is more than the total GDP of the EU.
The big four supported on average only 7% of the 279 resolutions, but an additional 48 would have passed had they supported them, the report said. This includes a resolution filed at confectionary firm Cadbury calling for greater disclosure over the operational and reputational risks associated with the company’s continued operations in Russia since the invasion of Ukraine in 2022.
BlackRock has previously argued the majority of shareholder proposals on environmental and social issues have become overly prescriptive, lack economic merit, or ask companies to address material risks they were already managing.
This is not a view shared by Nagrawala, who argued that “three quarters of the resolutions we assessed were simply asking for greater disclosure”.
The worsening support among large asset managers for shareholder resolutions is part of an ongoing trend. BlackRock only supported 8% of the 257 environmental and social resolutions analysed by ShareAction in 2023, compared to 40% in 2021. State Street Global Advisors supported 23% of them, while Fidelity Investments supported 16%, and Vanguard just 3%.
“We can only speculate on the degree to which the anti-ESG backlash has played a role in the fall in support from these managers,” said Nagrawala.
Polar opposite
Despite this decline in support for resolutions in the US, European asset managers are moving the other way. ShareAction attributes this to the EU Shareholder Rights Directive, a law designed to promote the exercise of shareholder rights.
UK and European asset managers supported 81% of shareholder proposals on average, compared to their US counterparts who supported around a fifth.
A 2024 report from Morningstar also highlighted this gap between the US and Europe, having found an average support of 50% for ESG resolutions among 20 US asset managers in the US, compared to 98% among 15 European counterparts.
European asset managers should nonetheless look to go further by committing to voting against management resolutions at companies that are falling short on social and climate action, the report suggested.
“The relative strength of European asset managers on voting on these shareholder resolutions has coincided with the introduction of a stronger, sustainable finance agenda in Europe,” said Nagrawala.
“We are seeing what stronger regulations can do, so it’s definitely important that asset owners engage with regulators to make sure that there’s sufficient guardrails in place.”
However, an omnibus, which is expected to be published next week, may water down key pieces of the EU’s sustainability reporting framework.
“Investment managers are seeking to deliver long term returns to clients,” the Investment Association wrote in an emailed statement to ESG Investor.
“The action investment managers can take will depend on the issue, the engagement that has already been taken and what is in the best interests of the company and their clients. Not all shareholder resolutions are in the long-term interests of the company and their shareholders.”
Membership requirements
Signatories of the temporarily suspended Net Zero Asset Managers Initiative voted in favour of an average of 64% of climate resolutions, compared to 55% of non-members.
Meanwhile, members of Climate Action 100+ voted more ambitiously than those who have dropped out. Asset managers who left CA100+ supported an average of 22% of resolutions, whereas those that remain supported 75%.
The number of shareholder resolutions addressing global biodiversity loss remained low, with the five biodiversity-related resolutions filed receiving an average 11.6% in support, compared to 22% support for similar resolutions in 2023.
“However, members of Nature Action 100 (NA100) were more likely to vote in favour of biodiversity resolutions, showing that there is growing momentum among committed asset managers,” the report said.
ShareAction called on asset owners to challenge their external asset managers on their voting policies and practices, including by asking them to align with their responsible investment priorities.
“Ensuring asset managers are aligned with the priorities of asset owners is vitally important for outcomes, and for the ultimate benefits of clients and members, such as local government pension scheme beneficiaries,” said Colin Baines, Stewardship Manager of UK-based Border to Coast Pensions Partnership.
He said the asset owner regularly monitors and assesses its external asset managers on their stewardship practices and engaged for improvement where required.
“We are stronger when we work together both as asset owners, and across the wider investment industry, and we should prioritise advancing stewardship standards across the board,” he said.
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