Environmental, social and governance (ESG) measures have been a hotly debated in statehouses across the country over the last few years. The investment criteria has drawn significant ire from conservatives who believe the strategy is inherently political. However, recent reports signal that support for these measures from institutional investors is waning.
BlackRock, the world’s largest asset manager, recently released its 2024 BlackRock Investment Stewardship (BIS) Global Voting Spotlight, which details its proxy voting record over the last year. The main takeaway? BlackRock’s support for shareholder proposals involving environmental and social issues has hit a new low. The firm voted in favor of just 4 percent of environmental and social proposals in the last year – down from 6.5 percent the year prior. This support is also significantly lower than the 2020-2021 and 2021-2022 reporting periods, which were 47 percent and 21 percent, respectively.
BlackRock pushed back on the notion that criticism of ESG was the reason for their retreat. The report stated, “Consistent with last year, we found that most shareholder proposals on climate and natural capital issues (environmental), as well as company impacts on people (social), were overreaching, lacked economic merit, or sought outcomes that were unlikely to promote long-term shareholder value.”
Regardless of the reason, it is encouraging to see a continued focus on shareholder value and fiduciary duty, as well as the recognition that many of these types of shareholder proposals are redundant, ideological in nature, and outside of a company’s core business goals. While asset managers have voted for these ESG proposals less and less due to the responsibility they have to their clients, other actors in the industry lack any kind of accountability and continue to push political proposals. Chief among them are Glass Lewis and Institutional Shareholder Services (ISS), the two firms which make up more than 90 percent of the proxy advisory market.
According to the latest ShareAction report on proxy voting, State Street, Vanguard, BlackRock and Fidelity all voted significantly “more conservatively than advised” by the leading proxy voting advisors. ISS supported more than 75 percent of resolutions, while Glass Lewis supported more than 30 percent. As asset managers continue to adhere to their fiduciary duty, it is time to hold the proxy advisory duopoly accountable as well. Congress and other stakeholders should turn their attention to those two firms and call for oversight and additional transparency.
