• Ranking shows US fund managers overwhelmingly blocking climate votes
• European managers mostly likely to support climate risk resolutions
• Good turn-out at ExxonMobil by Climate Action 100+ but voting must be systematic

New data reveals that large institutional investors in the US are stalling progress to tackle the social and economic risks of climate change, despite committing publicly to climate action. This is compared to investors in Europe who are more prepared to hold the worst polluters accountable.

Analysis by ShareAction, the responsible investment campaign group, reveals that the largest US asset managers are reluctant to challenge company management on climate issues with their voting decisions. Conversely, the most active and responsible stewards are based in the UK and Europe.

The report looks at shareholder votes cast by 57 of the world’s largest asset managers on a total of 65 proposals that would speed up corporate action on climate change. The range of proposals cover emissions reduction targets, climate reporting and governance, and corporate lobbying.

ShareAction finds that the 10 investors that are least supportive of voting for climate action are all based in the US. The five most likely to side with management on these issues are Capital Group, which supported less than 5% of climate proposals analysed, T. Rowe Price (5.3%), BlackRock and J.P. Morgan Asset Management (joint - 6.7%), Vanguard (8.3%), and Fidelity Management & Research Co (9.3%). However, even the second and third best US performers, Fidelity International and Goldman Sachs Asset Management International, supported fewer resolutions than 17 of the 18 European asset managers included in the ranking.

These results are highly concerning, ShareAction says, as the 20 largest US fund managers control about 35% of global assets under management.

Six of the 10 worst performers – BlackRock, J.P Morgan, Fidelity Investments, Wellington Management International, Northern Trust and State Street Global Advisers – have come out in support of the Taskforce for Climate-related Financial Disclosures (TCFD) and joined at least one investor engagement initiative on climate change, yet fail to vote in favour of resolutions on climate-related disclosures.

Jeanne Martin, campaign manager at ShareAction, and author of the report, says: “You can’t boast climate-awareness in public and block climate goals in private. Ultimately, these investors will be judged on their voting, which is the most powerful tool at their disposal. They have the power to put the brakes on the climate emergency, but they’re on auto-pilot, driving us head-on into it. We hope their clients take note of these findings which separate out those who are really walking the walk on climate change.”

The five best performers overall are UBS Asset Management, which supported over 90% of the resolutions in the study, Allianz Global Investors (88.5%), Aviva Investors (86.9%), Legal and General Investment Management and HSBC Asset Management (joint 82%) and AXA Investment Managers (78.7%.) These asset managers are all based in Europe, namely in the UK, France, Germany, and Switzerland.

The report also looks at the voting decisions of investors who are part of Climate Action 100+, the world’s largest investor engagement initiative on climate change. It assesses how asset managers voted on resolutions aligned with CA100+’s three key asks. While the report shows an encouraging improvement in the number of CA100+ investors voting for climate resolutions since 2017, most notably by Mitsubishi UFJ Trust and Banking Corp, there are still some CA100+ members shying away from holding their focus companies to account.

For example, Northern Trust, the US asset manager, voted for three consecutive years against a motion for transparency of Ford’s climate lobbying activities, a resolution which has seen diminishing support since 2017. The asset manager also voted against a lobbying resolution at General Motors which was originated by the company’s CA100+ leads in 2019, and against every climate-oriented resolution at ExxonMobil.

However, ShareAction notes the success of a group of progressive investors seeking votes for climate governance resolutions at ExxonMobil this year, as well as against the re-election of a number of directors. This includes BMO Global Asset Management, BNP Paribas Asset Management, DWS Group, Schroders and Union Investments. In contrast, Capital Group, Fidelity, Invesco, and Vanguard voted for the re-election of the entire board.

Michael Baldinger, Head of Sustainable & Impact Investing, UBS Asset Management, said: "Over the past 18 months we have been deepening our engagement with companies to drive positive change toward a low carbon economy. We expect companies to have a strategy for reducing greenhouse gas emissions, to be clear about goals, and to report on progress. Our voting record reflects this. Voting is an important part of our fiduciary duty to clients and integral to both the investment process and our overall stewardship approach.”

Sacha Sadan, Director of Corporate Governance, Legal & General Investment Management said: “Large companies play a key role in meeting climate targets, whether directly through their operations and products, or indirectly through influence and lobbying. We owe it to our millions of clients to continue using our shareholder power and our votes, in order to keep climate change on the board agenda and encourage companies to step up.”

Paul Todd, Nest’s Director of Investment Development and Delivery, said: “We carefully select the fund managers we work with and a key requirement is the demand for high quality stewardship. We expect our fund managers to engage with companies to drive behavioural change and improve long-term risk adjusted return. We don’t want to invest in companies that are out for short-term wins, achieved through questionable practice. Instead we want to invest in companies which are able to achieve sustainable long-term growth. Companies should be held accountable and we’re happy to use our voting rights when we believe they can be doing better. It’s great to see UBS, one of our fund managers and co-creator of our innovate Climate Aware Fund, score so positively.”

Owen Thorne, Portfolio Manager at Merseyside Pension Fund, said: “Passive investment managers have for far too long been passive stewards of capital. Asset owners like ourselves are becoming increasingly dissatisfied with how large index funds vote on climate change resolutions. As systemically important players we hope they will take notice of how their peers are using their voting rights to address material climate change issues by sending the clearest message to companies that reflects investors’ concerns and expectations.”

The report makes a number of recommendations to asset owner clients like pension funds:

• Assess asset managers’ climate-related performance and voting record on climate change resolutions during the asset manager selection process.
• Monitor their 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.
• Use the data in the report to inform their engagements with asset managers.

The full report can be found here.

Notes for editors:

• All voting data was taken from Proxy Insight on 17 September 2019, as well as from individual investors and publicly available information.
• The asset managers are the largest by assets under management in US, Europe, Australia, and the rest of the world, according to IPE's ranking of the top 400 asset managers. A full list of asset managers included in this analysis can be found in Appendix II of the report.
• The criteria used to select resolutions were as follows:
  • Climate change resolutions filed at S&P 500 companies.
  • Resolutions originated by CA100+ lead investors.
  • Resolutions at ExxonMobil which CA100+ lead investors were seeking votes for.
  • Resolutions that meet criteria 1-3 and were also filed in 2017 and/or 2018 at that same company.
  • A selection of climate resolutions filed by civil society organisations between October 2018 and September 2019.