The World’s Biggest Investors Get Louder About ESG
Perhaps never before have the world’s biggest fund managers been so vocal about how they plan to vote in annual shareholder meetings.
It’s not only Neuberger Berman, which telegraphed its decisions for more than 30 companies during this proxy season. BlackRock Inc. is regularly posting bulletins about its votes. Vanguard Group, in a rare move for the firm, revealed how it voted in the recent landmark overhaul of Exxon Mobil’s board of directors. Even firms like State Street Global Advisors and T. Rowe Price are declaring their positions (albeit when pushed).
It’s likely not a coincidence that these newly noisy investment giants are increasingly backing shareholder resolutions against company efforts to maintain the status quo. Exxon was the most public example as shareholders backed the appointment of three new directors despite the fossil fuel giant’s strenuous objections. Wall Street senses a new climate, and seems to be repositioning itself accordingly.
So far this year, there have been 169 environmental and social shareholder proposals, with average support of almost 34% of shares voted. Some 29 of those resolutions earned majority support, according to Rob Du Boff, an analyst at Bloomberg Intelligence. That compares with 173 resolutions filed last year that averaged less than 29% support. Among those proposals, just 21 received majorities.
Thirty-four proposals from this season are still pending, while a number of companies have yet to file their proxies, so the approval ratings may “obviously go higher,” he said.
“The BlackRocks of the world are getting more aggressive about voting in favor of not only climate-related issues,” but also social measures. These include a racial equity audit at Johnson & Johnson, a diversity and inclusion report from Berkshire Hathaway and a human rights due diligence report at Tyson Foods, Du Boff said.
From solely a financial standpoint, the trend makes sense given the enormous investment flows into ESG funds and looming regulatory mandates. A whopping $112.5 billion poured into exchange-traded funds focused on environmental, social and governance factors during the past 12 months, according to data compiled by Bloomberg. Meanwhile, The U.S. Securities and Exchange Commission is considering plans that would require mandatory corporate disclosures on topics such as climate risks and workforce diversity.
With the writing on the wall, big mutual fund managers are increasingly quick to say “they want public companies to do more on climate and do way more to help dismantle systemic racism,” said Jon Hale, global head of sustainable investing research at Morningstar Inc. “In effect, they’re saying to companies: We want you to care not only about profits, but about people, planet and profits.”
BlackRock, and to a lesser extent Vanguard, signaled last year that they were prepared to support more ESG-related shareholder proposals than they had in the past, Hale said.
“Not so long ago, you wouldn’t know anything about how funds and asset managers voted their proxies” because they aren’t required to disclose their votes until Aug. 31, he said. In addition, for most of recorded history, the overwhelming majority of shareholders ended up backing the recommendations of the companies’ managements, Hale said.
“Not so much anymore.”
Sustainable finance in brief
- The Bank of England unveils a sweeping new climate test for banks and insurers.
- Carbon dioxide reaches its highest level in four million years as climate change has populations fleeing northward.
- Global warming is endangering the future of fruit growers.
- The renewable energy boom has unleashed a war over green talent.
- Biodiversity disclosures are set to become part of company reporting.
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