Are asset managers using their proxy votes for climate action?
Climate change is one of the highest priorities facing investors. In this report, we’ve examined how 57 of the world’s largest asset managers voted on 65 shareholder resolutions linked to climate change. While there is encouraging improvement when it comes to voting for climate change resolutions, many still shy away from holding companies account. Investors voting power is the most powerful tool they have, it is vital that all investors use it.
Proxy voting is the primary means by which shareholders can exert influence over their investee companies and exert stewardship on issues such as executive pay, gender balance on board and climate change action.
Examining resolutions covering topics such as climate-related disclosures, companies’ lobbying activities and the setting of targets aligned with the goals of the Paris Climate Agreement, we found that:
US asset managers are clear laggards in terms of proxy voting on climate, whilst European asset managers lead the way
Our analysis suggests that US asset managers lag behind their peers on proxy voting. The 10 worst performers in this study are all based in the US, and the three best US performers have scores significantly lower than the best performers in the ‘Europe’ and ‘Rest of the World’ categories.
A number of CA100+ investor signatories fail to support resolutions at CA100+ focus companies
Focusing on climate resolutions filed at three focus companies of CA100+ (Chevron, Duke Energy and Ford) We analysed whether asset managers have changed their voting behaviour over time, and if so, what could explain this change in behaviour.
A number of ‘historical’ resolutions face relatively low levels of support, with investors sticking to their voting decisions through the years
We examined how voting patterns have evolved over three consecutive years (2017, 2018, and 2019) and which investors have seen the best (and worst) improvements.
The ExxonMobil AGM is a great example of investors, especially CA100+ investor signatories, embedding climate change into their voting decisions on director re-election and other governance matters
Our analysis suggests that a large number of investors responded to the Church Commissioners and NYSCRF’s call to take a robust approach to voting. We hope that the ExxonMobil AGM is a sign of things to come – and that asset managers will finally start using their votes for change in a more systematic way.
Resolutions on corporate lobbying and climate-related disclosures seem to have entered the mainstream. Resolutions on targets and transition planning filed by retail shareholders have received fewer votes than those filed by institutional investors in 2019
We found that the resolutions on climate-related disclosure filed in 2019 received a higher rate of support than resolutions on political lobbying and on transition planning and/or targets. This reveals a growing expectation from investors that companies are transparent about how they manage and price climate-related risks.
US asset managers are clear laggards in terms of proxy voting on climate, whilst European asset managers lead the way.
Our analysis reveals a clear divide in how asset managers vote on climate change resolutions across the globe. The 10 worst performers in this study are all based in the US, and the three best US performers have scores significantly lower than the best performers in the ‘Europe’ and ‘Rest of the World’ categories. European asset managers are more comfortable using their proxy voting rights to drive corporate change on climate than their peers, although their is still significant room for improvement.
A number of ‘historical’ resolutions face relatively low levels of support,
with investors sticking to their voting decisions through the years.
Examining 14 key resolutions over three years (2017, 2018 and 2019) we saw that, for a number of key votes, support has either been falling or stagnating. This could be down to a number of factors, including investors judging that a company had met the key climate change asks laid out in resolutions, or that a company’s performance had improved relative to its peers. However, only a small number of asset managers included this analysis changed their voting behaviour, which suggests that a large number of investors have stuck with their voting decisions over the years.
Resolutions on corporate lobbying and climate-related disclosures seem to have entered the mainstream. Resolutions on targets and transition planning filed by retail shareholders have received fewer votes than those filed by institutional investors in 2019.
Examining the different types of resolutions filed in 2019, we can see that those related to climate-related disclosure received higher levels of support than those which aimed to tackle lobbying or transition planning or climate change targets. This suggests that while there is a growing expectation of company transparency on how they manage and price in climate-related risks, this has not yet translated into more concrete asks for climate action.
Meanwhile, where resolutions were filed calling on companies to set concrete climate change plans and targets, there was a preference for those resolutions filed by institutional investors, compared to those being filed by retail investors, often NGO groups.
Conclusion & recommendations for asset owners
As stewards of capital for millions of beneficiaries, assets owners have a duty to monitor the engagement activities and proxy voting records of their asset managers. This analysis has shown clear discrepancies in how asset managers are using their proxy voting right to drive positive corporate climate action.
As such, we suggest the three following recommendations for asset owners interested in ensuring their money is used to steer company onto a pathway aligned with the Paris Agreement.
Use our findings to inform your selection and engagement with asset managers.
Assess asset managers’ climate-related performance and proxy voting record on climate change resolutions during the asset manager selection process.
Monitor your asset managers’ proxy voting decisions on climate change resolutions and on ordinary resolutions at companies that have shown persistent inaction on climate change and/or reluctance to engage with their shareholders.
We have amended Investec’s voting score to reflect that the asset manager did not have shareholdings in a number of companies considered in this analysis, and therefore was unable to vote on 42 of the 61 climate resolutions included in this analysis. Investec voted for 63.16% of the remaining 19 resolutions.