• Major investors routinely ignore advisors’ recommendations, instead voting against environmental and social issues at company meetings.
  • The world’s three largest asset managers are the worst offenders, voting against their advisors to block action up to 74% of the time.
  • Little evidence to suggest investors ‘auto-vote’ with their hired advisor on these issues.
  • Largest proxy advisor supports environmental issues 42% more often than the second largest.

The world’s three largest asset managers – BlackRock, State Street and Vanguard – vote against their hired advisors to block environmental and social action at companies nearly three quarters of the time, according to new analysis into proxy advisor recommendations.

The analysis by responsible investment charity ShareAction, on behalf of the Charities Responsible Investment Network (CRIN), examines the votes cast by 23 big name and charity asset managers on 127 environmental, social and political lobbying proposals.

Contrary to concerns that proxy advisors have too much influence, ShareAction’s research finds that the majority (65%) of investors – including many commonly used by charities – are in fact less progressive than their voting advisors. These investors include J.P. Morgan (which voted less progressively on ESG issues than its advisor recommended 71% of the time, Baillie Gifford (54%) and BNY Mellon (39%).

The ‘Big Three’ asset managers – who collectively control over $11tn assets and an average of 25% of the votes at the largest U.S. companies – are the worst offenders, lagging behind their advisors’ positive recommendations by up to 74%. For example, Vanguard supported only 6% of the 120 resolutions that they voted on, despite their advisor ISS recommending support for 80%.

Political lobbying resolutions provide the most striking difference, with Vanguard voting against ISS’ positive recommendation on average 95% of the time. The research finds a similar trend at BlackRock and State Street, who voted against their advisor’s positive recommendations 91% and 63% of the time on lobbying, respectively.

The research shows that those asset managers who showed the least support for lobbying resolutions were themselves heavily engaged in political lobbying.

Isobel Mitchell, ShareAction Network Officer and co-author of the report, says: “Our research shows asset owners should be concerned about their managers’ own practices and behaviour influencing their voting decisions, rather than an overreliance on the recommendations of proxy advisors, as is often claimed by business lobbyists.”

Meanwhile, investors Sarasin & Partners, CCLA, HSBC Global Asset Management and Aviva Investors are consistently more progressive than their advisors. Sarasin & Partners leads the way on environmental issues, voting more positively than their advisor 38% of the time.

The report examines the two largest proxy advisors, ISS and Glass Lewis – who together represent 97% of the market. The analysis shows ISS is the more progressive of the two, recommending that investors support environmental, social and lobbying issues 79% of the time. In contrast, Glass Lewis, supported proposals on these key issues only 54% of the time.

For environmental proposals, Glass Lewis only recommended support for 24% of proposals, compared to 66% support from ISS – a shortfall of 42%.

The research by ShareAction comes as the SEC consults on controversial new regulations which could see recommendations by proxy firms watered down by corporate management and business lobbying groups.

Mitchell says: “Corporate lobby groups have managed to paint proxy advisors with a bad brush, but our analysis shows that the picture’s not so rosy for asset managers. The onus should firmly be placed on investors to vote in a manner which fosters a more just and sustainable world. We’re asking investors to step up and explain why they’re going against their hired advisors and voting down crucial ESG issues. We also encourage charities to hold their managers to account on their voting decisions, using the results and recommendations in the report.”

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Notes to editors:

  • For more information, please contact Beau O’Sullivan at beau.osullivan@shareaction.org
  • The full report can be found here.
  • The data in the report was taken from Proxy Insight on 23/09/2019. All the asset managers included in this study were contacted at least twice by ShareAction, as part of our data verification procedure for the report. 20 managers confirmed the data directly to ShareAction.
  • List of asset managers included in the report: Aberdeen Standard Investments, Aviva Investors, Baillie Gifford, BlackRock, BMO Global Asset Management, BNY Mellon Investment Management, CCLA, Fidelity International, HSBC Global Asset Management, Invesco, Investec Asset Management, J.P. Morgan Asset Management, Janus Henderson Investors, Jupiter Asset Management, Legal and General Investment Management, M&G Investments, MFS Investment Management, Newton Investment Management, Royal London Asset Management, Sarasin & Partners, Schroders, State Street Global Advisors, Vanguard Asset Management.
  • The report analyses 127 environmental, social and lobbying resolutions filed at meetings in Europe and the US during 2019.
  • The Methodology for selecting asset managers was as follows:
    · The top 10 UK managers (including US/UK) and top five US managers, as per the Investment & Pensions Europe (IPE) 2019 Top 400 Asset Managers list, which is based on AUM.
    · A list of charity asset managers used by members of the Charities Responsible Investment Network (CRIN).
  • The Charities Responsible Investment Network was founded in 2013, and currently has 20 members with over £6bn in assets.
  • ShareAction is a charity that exists to make the global investment sector responsible for its impacts, while mobilising its power to tackle climate change, human rights, and global health issues. The potential for harnessing the financial system to create a green, fair, and healthy society is huge, but major financial institutions are currently failing to drive the change we need. We want a future where all finance powers social progress and since 2005, we’ve developed a powerful toolkit of research, corporate campaigns, policy advocacy and public mobilisation to create a more responsible finance system in which:  
    • Major financial institutions take responsibility for their impacts on people and planet   
    • Investors and the companies they invest in operate within safe ecological limits   
    • Investors and the companies they invest in sustain fair, just and healthy societies, and  
    • The investment system is diverse and inclusive at all levels.