Voting Matters 2020

Are asset managers using proxy voting for action on climate and social issues?

In 2020, the world faced a health crisis, which brought economic and social turmoil. It showed how deep inequalities make society as a whole more vulnerable — an important lesson in an era of climate change and rampant inequality. Over the long-run, it could be a turning point for responsible investment.

Effective stewardship is widely regarded as a driver of enhanced operational and financial performance. It helps to reduce risks and maximise returns, enhance overall market stability and maximise positive impacts on society and the environment. Shareholder resolutions are an essential aspect of stewardship. This report examines how 60 of the world’s largest asset managers are using this tool. 

Asset managers are still not effectively using their proxy voting power when it comes to environmental and social issues

Meanwhile, one in six of the asset managers included in the ranking did not vote at all in over 10 per cent of the resolutions they could have voted on. The number of managers choosing not to vote should alarm asset owners. It is a warning sign that these managers failing to deliver basic stewardship activity. 

European asset managers outperform their US counterparts. The top 17 best performers are all in Europe. Six on these managers voted in favour of 95 per cent of resolutions. There has been noticable improvement by some of last year’s worst performers, namely, Northern Trust, JPMorgan Investment Management and Wellington Management Company, but the five worst performers remain in the US. 

When it comes to impact, the Big Three (BlackRock, Vanguard Group and State Street Global Advisors) continue to have an outsized influence. Just 15 out of 102 shareholder resolutions received majority support in 2019/2020. An additional 17 resolutions would have passed if one or more of the Big Three had changed their vote. Their rationale for voting against these resolutions seem to be at odds with other shareholders too. These resolutions recieved an average 40.4 per cent support. 

Breakdown of climate and social resolutions that would have passed with Big Three support

Climate continues to creep up the agenda but asset managers are not yet utilising their voting power

Proxy voting is one of the most cost-effective and impactful engagement tools at asset managers’ disposal. It is a key component of effective stewardship. Yet, when it came to climate change in 2020, many asset managers continued to justify their refusal to support climate resolutions on the basis that they preferred to engage privately, or that the company was already doing more than its peers.

This is a disappointing trend. Given the scale of the climate crisis, we would expect managers not to shy away from voting on critical resolutions and to continue to push for greater ambition. 

Thirty-seven of the asset managers studied are members of the Climate Action 100+ initiative, aimed at engaging with the world’s largest emitters of carbon. On average these investors have better voting records, with members supporting 69% of climate resolutions, compared with 39% for non-members. But even here, five CA100+ members – Nordea Investment Management, BlackRock, Lyxor Asset Management, Credit Suisse Asset Management, and Ninety One – voted for 50% or less of climate resolutions.

Average votes for climate resolutions by CA100+ members

Despite an increased in social issues because of Covid-19, this is not translating into voting decisions.

This year the Covid-19 pandemic has brought into sharp focus the ‘S’ of ESG and underlined the material risks related to the treatment of workforces. Despite this, we found no correlation between support for resolutions on human rights before and after the WHO’s declaration of a pandemic in March. Furthermore, no voting rationales referenced the pandemic.

Full asset manager ranking

“Voting split” statistics are expressed relative to the entire resolution sample (102 resolutions) and are therefore not representative of each Asset Managers’ performance on their individual voting universe (i.e. perimeter excluding companies they do not hold and missing data), reported under “Overall”, “Climate” and “Social”.

* The asset manager’s holdings were insufficient to vote on at least five resolutions in each category (Climate, Lobbying, Social) and therefore its voting record is excluded from the ranking established for that category.