- Finding 1: The four largest asset managers in the world backed significantly fewer shareholder proposals than they did in 2021.
- Finding 2: The four largest asset managers in the world vote more conservatively than their proxy voting advisors.
- Finding 3: Forty-nine additional resolutions would have received majority support if BlackRock, Vanguard, and State Street Global Advisors had voted in favour of them.
- Finding 4: Passive managers don’t have to be passive on stewardship.
- Finding 5: Progress on voting behaviour differs by region, with stagnant performance from the US and UK, while other European managers race ahead.
- Finding 6: An asset manager’s size does not prevent it from voting in favour of environmental and social shareholder resolutions.
- Finding 7: Three asset managers improved on their 2021 voting performance by more than 30 percentage points.
- Finding 8: Asset managers are exercising their votes more than ever.
- Finding 9: Asset managers don’t support action-oriented resolutions as much as disclosure-orientated resolutions
- Finding 10: Asset managers used commonly by UK charities do not outperform the world’s largest asset managers when voting on ESG shareholder resolutions
Finding 1: The four largest asset managers in the world backed significantly fewer shareholder proposals than they did in 2021.
Figure 1 – The four largest asset managers backed fewer environmental and social shareholder proposals in 2022 than they did in 2021
On average, the four largest asset managers supported 20% of resolutions in our 2022 assessment, compared to 32% in 2021 (Figure 1).
Because of the size of their holdings, these asset managers have a particularly large influence on corporate behaviour through their voting decisions. The $27 trillion in assets they manage is equivalent to the market capitalisation of the 250 largest companies in the US[1].
Vanguard, Fidelity Investments, and BlackRock performed particularly poorly. These managers all backed significantly fewer shareholder proposals in 2022 than they did in 2021 (Figure 1).
State Street Global Advisors’ performance was more consistent between 2021 and 2022, with their voting performance falling by a comparatively modest four percentage points.
Some large asset managers cited the increased number and lower quality of resolutions in 2022 as the reason for the decline. It is also notable that the reduction coincided with the high-profile ‘ESG backlash’ in the US[2] as well as the evolution of resolutions on climate from disclosure and governance to addressing transition planning and execution.
Figure 2 – The four largest asset managers’ average support for environmental resolutions at energy companies fell between 2021 and 2022
Much of the observed fall in support occurred in resolutions filed in the energy sector (Figure 2). This could be explained by unwillingness to challenge energy companies in light of record profits following the war in Ukraine, resulting in greater dividends and buybacks for shareholders[3].
Notably, Blackrock backed 72% of environmental resolutions at energy companies in 2021 compared to just 16% in 2022. This reduction is much larger than the change in their average support for environmental resolutions across all other sectors, which fell by a relatively small ten percentage points, from 43% in 2022 to 33% in 2021.
Our assessment shows that when put to the test, these asset managers’ voting performance is inconsistent with their public climate commitments[4]. 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.
Finding 2: The four largest asset managers in the world vote more conservatively than their proxy voting advisors.
The four largest asset managers consistently voted more conservatively than their proxy advisors recommended (Figure 3).
All four managers use the services of either one or both of the world’s largest proxy voting advisors, Institutional Shareholder Services (ISS) and Glass Lewis. Proxy advisors are for-profit firms who, among other services, provide recommendations to institutional investors on how to vote at shareholder meetings on issues such as climate change, executive pay and board composition.
ISS recommended that managers vote in favour of 75% of the resolutions in our dataset in 2022, while Glass Lewis recommended that managers vote in favour of 42%.
While we advise asset managers to review the recommendations of proxy voting advisors, it is surprising that all four of the largest asset managers are voting more conservatively than both leading proxy voting agencies.
Moreover, ISS and Glass Lewis themselves have not become more conservative this year. Glass Lewis recommended voting for a very similar percentage of resolutions we analysed (44% in 2021 and 42% in 2022) and ISS remained the same at 75%. This further emphasises that the world’s largest asset managers differ considerably from established guidance on proxy voting.
Figure 3 – Proxy voting advisors ISS and Glass Lewis recommend voting in favour of more shareholder resolutions on our list than the world’s four largest asset managers
Finding 3: Forty-nine additional resolutions would have received majority support if BlackRock, Vanguard, and State Street Global Advisors had voted in favour of them.
Given the size of BlackRock, Vanguard and State Street Global Advisors (commonly referred to as the Big Three), they have a powerful influence over the overall support that shareholder resolutions receive at the world’s largest companies. As in 2020[5] and 2021[6], we again assessed how many resolutions would have received majority support if these three managers had voted in favour of them[i].
We found that 19% (49 of 252) of resolutions included in our analysis would have received majority support[ii] this proxy season if the three managers had voted in favour of them. Fifteen of these resolutions would have received majority support with support from just one of the three. These resolutions covered topics from racial equity and lobbying transparency to climate action. A full list of these 49 resolutions can be found in the List of Resolutions.
This is a notable increase from the 12% of resolutions (18 of 154) that would have received majority support with support from these three managers in 2021. This increase reflects, firstly, the growing outsized ownership of the BlackRock, State Street Global Advisors and Vanguard[7]. Secondly, it reflects how the three voted in favour of fewer shareholder resolutions in 2022 than in 2021 (Finding 1).
Six of the 49 resolutions were action-oriented resolutions which request companies to adopt policies and set targets rather than solely disclose information (Figure 4). With majority support, these resolutions would have encouraged energy companies Chevron, ConocoPhillips, Phillips 66 and Valero to set Paris-aligned greenhouse gas emission reduction targets, which are critical for effective climate change mitigation.
Figure 4 – If one or more of the Big Three had voted in favour of six action-oriented resolutions, they would have received majority support
Finding 4: Passive managers don’t have to be passive on stewardship
Passive investing is an investment strategy that commonly involves investing in an index, whereby investors purchase a representative benchmark and hold it over a long time horizon.
Proxy voting is particularly important for asset managers with a predominantly passive investment approach, as there are fewer capital allocation levers to exercise responsibility over the assets compared to active funds. For example, active managers can reduce holdings in a company if expectations are not being met but this option is not available to passive managers.
Many of the large managers we assessed are predominantly passive managers, and performed poorly (Finding 3).
There are, however, notable exceptions which show that it is possible for a passive manager to be proactive in voting in favour of shareholder resolutions. Legal and General Investment Management is the ninth largest asset manager in the world, and has a predominantly passive investment approach. However, it backed 87% of the shareholder resolutions we assessed, 9% more than they did in our 2021 assessment.
Finding 5: Progress on voting behaviour differs by region, with stagnant performance from the US and UK, while other European managers race ahead.
On average, for the asset managers assessed, votes ‘for’ environmental and social shareholder resolutions on our list increased from 60% in 2021 to 66% in 2022[iii].
However, there is a clear regional divide. European asset managers, on average, backed 81% of proposals in 2022 compared to 69% in 2021 (Figure 5). This is in stark contrast to the US and UK where managers on average only showed a 1 percentage point increase. The average for the US and the UK hides dispersion in voting performance over time, with some asset managers greatly improving their voting performance while others deteriorated.
The improved performance of European managers coincides with the strengthening of EU legislation on ESG reporting. The EU Shareholder Rights Directive, which came into force in September 2020, requires managers to report on their shareholder engagement and investment strategies[8]. Voting behaviour and proxy advisor services must also be disclosed and made available to clients.
By contrast, we continue to find particularly poor performance from US asset managers. US managers backed on average less than half (43%) of the environmental and social resolutions on our list in 2022 (Figure 5).
While there have been some attempts to strengthen financial legislation in the US to match developments in Europe, there remain big differences. Importantly, there are still no mandatory reporting requirements on ESG in the US[iv].
Figure 5 – European managers (excluding UK) show a strong increase in voting performance compared to 2021, while US and UK managers remain relatively stagnant
Finding 6: An asset manager’s size does not prevent it from voting in favour of environmental and social shareholder resolutions.
While there was a moderate, negative link between an asset manager’s size and their voting performance[v], large, medium and small asset managers can be either leaders or laggards in their support for environmental and social shareholder resolutions (Figure 6). The very largest asset managers performed poorly, however, Amundi Asset Management is the seventh largest asset manager in the world and ranked tenth in our assessment.
Meanwhile, two small European asset managers, Impax Asset Management Group and Walter Scott & Partners, ranked first and 68th respectively. Impax has $56 billion of assets under management (one two-hundredth the size of BlackRock) and backed 100% of the resolutions we assessed. Its strong support for environmental and social resolutions is likely related not to its size but to its impact-oriented investment philosophy[9].
However, other asset managers without this impact focus do also vote in favour of a large proportion of shareholder resolutions. This is evidenced by Man Group and Candriam, which backed 96% and 98% of resolutions respectively.
Figure 6 – An asset managers’ size does not prevent it from supporting a large percentage of environmental and social shareholder resolutions
Finding 7: Three asset managers improved on their 2021 voting performance by more than 30 percentage points.
Three European asset managers made the largest improvements in voting performance compared to 2021, looking at a comparable list of resolutions. SEB Investment Management, PGGM Investments, and Eurizon Asset Management all increased their voting performance by more than 30 percentage points (Figure 7). Their improvement was largely driven by significantly fewer instances of ‘Did Not Vote’ (where the asset manager actively chose not to cast a vote).
Eurizon Asset Management’s progress follows an update to their voting policy. Meanwhile, SEB Investment Management recently launched a public voting dashboard. Increased transparency on how they voted may have pushed them to vote more progressively.
Figure 7 – Three asset managers showed a more than 30 percentage point increase in votes ‘for’ shareholder resolutions between 2021 and 2022
Finding 8: Asset managers are exercising their votes more than ever.
We saw fewer Did Not Vote (DNV) records across all asset managers in 2022. DNVs convey that the investor is not interested in the environmental and social issue the resolution addresses.
In our 2021 analysis, seven asset managers did not exercise their votes on over 40% of resolutions[10]. Of the six assessed again in 2022, Lyxor (now merged with Amundi Asset Management), SEB Investment Management, Eurizon Asset Management, and Swedbank Robur have greatly reduced their number of DNVs. In 2022, only Santander Asset Management and EFG Asset Management still Did Not Vote on 40% or more of the resolutions.
Santander failed to exercise its voting rights on 93% of the resolutions we assessed. This does not align with its commitment, as a signatory to the Principles for Responsible Investment, to exercise its voting rights. The company has, however, updated its voting policy for the 2023 proxy voting season, which should enable it to vote on a greater proportion of shareholder resolutions.
Finding 9: Asset managers don’t support action-oriented resolutions as much as disclosure-orientated resolutions
Action-oriented resolutions request companies to adopt policies and set targets rather than solely disclose information. As a result, they are more likely to drive change that improves a company’s impact on people and planet. We calculated an action-oriented voting score, using the action-oriented resolutions on our list.
There were some large differences between an asset manager’s overall voting performance (including both disclosure and action-oriented resolutions) and their action-oriented performance (Figure 8). On average, the action-oriented scores were lower than the overall scores (54% compared to 65%).
Three asset managers had much higher action-oriented scores than overall scores: Wellington Management, Generali Insurance Asset Management and Man Group (Figure 8).
By contrast, 57 asset managers had lower action-oriented scores than overall scores. SEB Investment Management, for instance, had an overall score of 81% and an action score of 50% (Figure 8). This demonstrates that there are some asset managers who, on the whole, are voting in favour of a large proportion of environmental and social resolutions but do not support the most impactful resolutions.
Some asset managers mentioned that they were unwilling to support action-oriented resolutions because the wording was too prescriptive, and that they did not want to micro-manage the company. However, asset managers have unique expertise in seeing whole economy, long term threats that require a company to urgently adapt. Supporting action-oriented resolutions can therefore represent clients’ best interests by managing systemic, long-term risks.
Figure 8 – Some asset managers’ action-oriented voting performance was markedly different from their overall voting performance
Finding 10: Asset managers used commonly by UK charities do not outperform the world’s largest asset managers when voting on ESG shareholder resolutions
We compared the voting performance of the world’s largest 68 asset managers with 10 asset managers commonly used by UK charities.
These 'charity asset managers' voted for fewer resolutions on average than the 68 largest asset managers. While the range of scores between the two groups was similar, the average score for charity asset managers was slightly lower: the mean percentage of ‘for’ votes for charity asset managers was 57% (median 56%) compared to a mean of 65% (median 69%) for the 68 asset managers assessed here.
Only two charity asset managers – CCLA and Cazenove – performed better than the median asset manager in our main sample (Figure 9).
Our full analysis of charity asset managers prepared for the Charities Responsible Investment Network and Responsible Investment Network – Universities, including the full methodology, is available here.
Figure 9 – Only two charity asset managers performed better than the mean asset manager in our main sample
Footnotes
[i] Investment and Pensions Europe’s 2022 list of the largest asset managers shows Fidelity Investments as having the third largest assets under management, ahead of State Street Global Advisors. However, State Street Global Advisors’ holdings in the companies we assessed were often found to be larger. We therefore chose to analyse how BlackRock, Vanguard and State Street Global Advisors voted when looking at how overall support for resolutions could have changed.
[ii] We refer to resolutions receiving ‘majority support’ rather than ‘passing’ due to the different thresholds for resolutions requiring responses from management across different jurisdictions.
[iii] This finding is based on a comparable list of resolutions between 2022 (206) and 2021 (146), and analysing the 57 asset managers featured in both assessments.
[iv] The US Financial Stability Oversight Council released a report in October 2021 in response to President Biden’s Executive Order on climate change. While the report outlined high-level recommendations on risk assessment and disclosure, reporting remains voluntary.
[v] The Pearson correlation coefficient between asset managers’ assets under management and voting performance was -0.45 to two decimal places.
References
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[10]. ShareAction (2021) Are asset managers using their proxy votes for action on environmental and social issues? https://shareaction.org/report.... .
All links accessed November 2022
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