September 8, 2023
Asset managers continue to push back against the rhetoric that they are breaching their fiduciary duty by focusing on environmental, social, and governance (ESG) proposals. The latest proof point is the waning support for ESG resolutions by the so-called Big Three asset managers – BlackRock, Vanguard, and State Street.
According to new data, broad support for ESG resolutions fell to 15 percent in 2023, from 25 percent in 2022 and 32 percent in 2021. This reveals that support has steadily dropped each year, but the most shocking numbers come from a recent report that revealed BlackRock supported only 7% of proposals related to climate change and social issues in the past 12 months.
BlackRock isn’t citing the reason for the decline as responses to the extreme Republican backlash. Rather, they claim the proposals were “over-reaching, lacking economic merit or simply redundant, they were unlikely to help promote long-term shareholder value.” There has concurrently been a noticeable increase in the number of ESG shareholder proposals possible because of the change in the Securities and Exchange Commission’s – making it harder for companies to block them. According to proxy voting group, Institutional Shareholder Services (ISS), there have been a record 340 ESG proposals in the US already, which is up from the 300 in all of 2022.
Although BlackRock is not the only asset manager declining ESG proposals, their pullback was the most pronounced. State Street Global Advisors still backed 32 percent of ESG resolutions this year, down from 44 percent in 2022 and 49 percent in 2021. The other Big Three asset management firm, Vanguard, also released their 2023 proxy voting which showed similar declines to their peer firms. However, Vanguard had made their own type of statement against ESG when they pulled out of the Net Zero Managers initiative, a coalition of 301 asset managers committed to reducing greenhouse gas emissions. Though at the time chief executive, Tim Buckley, cited the reason for Vanguard’s leaving due to their voice “being drowned out or confused.”
Whatever the reason for this shift in the ESG outlook, it does feel like a continued step in the right direction and much-needed reassurance for shareholders to know that their bottom line is still what matters most. Republicans might even interpret this as a breakthrough, or transformation within the industry due to their diligence on the matter.
Either way, this report does follow closely behind an op-ed in the Wall Street Journal by BlackRock executives promoting their voting choice program, as well as their decision to name a fossil fuel entity’s CEO, (in this case the company being mega national firm Saudi Aramco) to their board of directors. These decisions by the asset management industry more broadly seem to reiterate their focus on returns above all, and commitment to maximize investment values for their clients.
If there is one thing everyone can agree on, it’s that these companies should keep the focus on their mission to create better financial futures and success for all those they serve. It seems like they are all starting to do that when it comes to how they vote during corporate proxy season.
