Recommendations for asset managers
The findings of this report are relevant to all asset managers (including those not featured in this report) for assessing their own voting performance and identifying areas for improvement.
We recommend that asset managers:
- Use this analysis to assess where their voting performance is more conservative than peers and how they may be able to improve to meet clients’ expectations.
- Develop, strengthen and regularly update voting policies that explicitly cover material environmental, social and governance (ESG) themes and that are designed to appropriately mitigate impacts on people and planet.
- Explicitly commit to support shareholder resolutions that help resolve environmental and social problems by default, and provide a public explanation whenever this commitment is not met (i.e., ‘comply or explain’). This enables asset managers to identify ESG shareholder resolutions that do not try to resolve environmental and social problems, and to ensure their votes benefit people and planet.
- Improve transparency on proxy voting by publishing voting policies, voting records, and voting rationales in a manner that is timely and user-friendly (Box 1).
- Commit to voting at all AGMs, regardless of geography or the level of holdings.
- Pre-declare voting intentions for important and/or contentious ESG resolutions to encourage others to vote and to increase understanding of the issues at hand.
- Disclose data on follow-up engagement for all instances where they have opposed management on environmental and social resolutions.
- Escalate at companies failing to make sufficient progress on ESG issues, using tools such as co-filing resolutions, voting against directors and reducing investment.
- Engage with filers to optimise resolution wording where the asset manager is sympathetic to the aim but considers its phrasing problematic.
Important elements of transparent and user-friendly voting disclosure
• Voting records on all resolutions are disclosed as soon as possible after meetings, or at least monthly
• Voting records are available in a digital format that can be easily downloaded and processed
• Voting records are disclosed in a format that is easy to search and filter
• Summary statistics of voting data are published with important and/or contentious votes highlighted
• Rationales for all votes against and abstentions on shareholder resolutions and standing items are published
Recommendations for asset owners
As stewards of capital for beneficiaries, asset owners have a duty to monitor the engagement activities and proxy voting records of their asset managers. In particular, pension funds must be prepared to explain why their asset manager’s voting record is in their beneficiaries’ interests or, if not, to state what they are doing to change this.
We recommend that asset owners:
- Use this research to inform selection, monitoring and review of asset managers. Integrate key asks (such as the publication of voting records) into tendering processes and review voting decisions as part of regular performance reviews.
- Ask their asset manager to publish voting records if they do not already do so (Box 1).
- Ask their asset manager to disclose data on follow-up engagement for all instances where they have opposed management on environmental and social resolutions.
- Consider engaging collaboratively with other asset owners who share their asset manager. When multiple clients engage an asset manager on a specific topic, it can enhance their effectiveness by demonstrating the strength of feeling among their clients.
- Challenge asset managers to vote at all AGMs and to do so on a comply or explain basis.
Recommendations for investment consultants
Asset owners often draw on the advice and expertise of investment consultants to support their responsible investment activity and selection of asset managers. The following recommendations are designed to be complementary to those for asset owners.
We recommend that investment consultants:
- Develop a system to monitor and review asset managers’ votes, and provide feedback to clients.
- Ask asset managers to publish voting records in line with best practice (Box 1).
- Engage with asset managers to vote on all shareholder resolutions that help resolve environmental and social issues on a comply or explain basis.
Recommendations for policymakers
Regulation can have a powerful influence over the behaviour of asset managers, including how they steward the capital they manage. Different jurisdictions have different regulations on the asset management industry and proxy voting, but all policymakers can take steps to improve voting accountability on important environmental and social issues.
We recommend that policymakers:
- Strengthen regulation to enhance proxy voting transparency and the standardisation of proxy voting disclosure (Box 1).
- Use analysis of proxy voting to evidence where asset managers have made sustainability commitments but have voted inconsistently with those commitments, thereby substantiating claims of greenwashing.