GREEN FINANCE: Asset managers’ backing of ESG resolutions falls to three-year low

Asset managers backing resolutions on important environmental and social issues as company shareholders has fallen to a three-year low, according to a ShareAction report.

Only eight out of 257 resolutions demanding improvement of companies’ practices on social and environmental issues were passed last year, down from 14% in 2022, and a peak of 21% in 2021, according to figures in ShareAction’s Voting Matters 2023 report.

The responsible investment charity is therefore urging asset managers to rethink voting policies seen during the last annual general meeting (AGM) season.

Among the 69 surveyed asset managers, EFG Asset Management, Achmea investment Management, Amundi, Impax Asset Management and PGGM voted in favour of most of the 257 resolutions, according to the report.

The demands of the shareholders weren’t pressing enough, demanding mostly companies only to improve disclosures in environmental and social risks, it said, adding that asset managers that set net zero targets voted against climate resolutions.

The steep decline over the years of shareholder support for ESG matters is driven by the ‘big four’ asset managers – State Street Global Advisors, Fidelity Investments, BlackRock, and Vanguard – the report said.

BlackRock supported only 8% of environmental and social shareholder resolutions last year, Vanguard only 3%, with 69 ESG-related resolutions at companies such as Amazon, Apple, Coca-Cola Company, Dow, Pfizer, and Lockheed Martin, that would have been passed with the backing of the “big four” asset managers, it added.

“The influence of the ‘ESG backlash’ centred in the US, characterised by legal pressures and state withdrawals from ESG-focused funds, is an important factor shaping this downward trend,” Emily Ahmed, EU policy manager at ShareAction, told IPE.

According to ShareAction, 13 US-based asset managers supported on average 25% of the resolutions in 2023, down from almost 40% in the previous two years.

Ahmed added: “It appears that some US asset managers have been bending to the pressure from this vocal minority constituency, despite being fully capable of resisting such pressure, and voting in favour of resolutions addressing key social and environmental issues.”

Last month, the Tennessee Attourney General Jonathan Skrmetti filed the first-of-its-kind consumer protection lawsuit against BlackRock. The complaint alleges that Blackrock mislead consumers about the scope and effects of its widespread ESG activity.

In the EU, instead, the legislative framework on sustainable investing is having a positive impact on shareholder engagement.

On average, according to the ShareAction’s report, European asset managers voted in favour of 88% of shareholder proposals in 2023, and the asset managers that voted in favour of more than 90% of resolutions are all based in Europe.

“With EU elections on the horizon, it is vital that European policymakers uphold this positive trajectory and consolidate progress that has been achieved through implementing and strengthening sustainable finance regulation,” Ahmed said.

“Regardless of the results of the election or any potential backlash against ESG, EU institutions should be resolute in making the case for responsible investment as being central to Europe’s long-term prosperity and EU asset managers should maintain and build on their positive performance trends,” she added.