increasing disparity in climate change measures: American fund managers lessen backing for climate-related resolutions while European counterparts strengthen commitment
Decline in ESG and Climate Resolution Support Among Major Asset Managers
A new report from ShareAction, titled "Voting Matters," has revealed a significant drop in shareholder support for Environmental, Social, and Governance (ESG) and climate resolutions during the 2024 AGM season. This decline is particularly noticeable among the world's largest asset managers, particularly in the US.
The report highlights a roughly one-third drop in the number of shareholder proposals filed and historic lows in the percentage of environmental and social proposals gaining significant support. Only about 13% for environmental and 12% for social proposals achieved notable backing, down from previous years.
Several factors contribute to this decline. The US Securities and Exchange Commission (SEC) introduced new guidance early in 2024 that gave companies more authority to exclude ESG-related proposals from shareholder ballots, reducing the volume of ESG resolutions reaching vote. Proxy advisory firms such as ISS and Glass Lewis also scaled back support for ESG resolutions, citing better corporate disclosures and mounting political pressure as reasons.
Major asset managers, including BlackRock and Vanguard, have retreated from unconditional support for diversity mandates and ESG resolutions, instead implementing client-directed voting policies to manage reputational risk. This shift in behavior is also influenced by regulatory changes, political backlash, and growing skepticism about the effectiveness and strategic use of shareholder resolutions.
The overall result is a "cooling" or retreat in ESG shareholder activism in the US during 2024, despite ongoing climate challenges. European asset managers and companies have generally seen a less pronounced decline due to differences in governance norms and shareholder filing processes.
Despite this trend, the report suggests that many managers remain committed to tackling climate change. For instance, Julien Halfon, head of Pension Solutions for BNP Paribas Asset Management, maintains that the manager has no intention of scaling back its climate ambitions. BNP Paribas Asset Management is working with clients to turn around their portfolios with a focus on climate.
Similarly, James Corah, head of Sustainability at UK manager CCLA, reaffirms the manager's commitment to achieving net-zero emissions on listed equities by 2050. Members of the Net Zero Asset Managers initiative, which suspended its activities after Vanguard, BlackRock, and other US managers announced their departure, voted in favour of an average of 64% of climate resolutions, compared to 55% by non-members.
However, it remains uncertain how many clients will exercise a different vote from their managers or instead will choose a manager who is more aligned with their stance on climate. A coalition of 26 asset owners representing some $1.2trn in assets issued a statement on stewardship alignment, expressing their continued commitment to tackling climate change. The coalition's statement outlines escalation mechanisms, including downgrading asset manager ratings, reassessing mandates, or selecting asset managers demonstrating greater alignment with objectives.
ShareAction's research points out that 75% of shareholder proposals put forward last year simply asked for enhanced disclosure, particularly on climate and emissions. BlackRock only supported 4% of environmental resolutions in 2024, compared to nearly 30% in 2021. BlackRock highlights the availability of voting choice mechanisms, allowing clients to vote differently from their managers.
In summary, the US 2024 AGM season saw a marked reduction in ESG and climate resolution support primarily due to tighter SEC rules, reduced proxy advisor backing, asset manager caution amid political polarization, and concerns about shareholder resolution effectiveness. However, the commitment of many managers to tackle climate change remains evident.
[1] ShareAction (2024). Voting Matters 2024 Report. [Online] Available at: https://www.shareaction.org/resources/voting-matters-2024-report/ [3] Financial Times (2024). ESG activism cools in US as asset managers retreat. [Online] Available at: https://www.ft.com/content/e8c1f52f-b0b2-499e-997f-ebd1b7a95d0f
- In light of the decline in ESG and climate resolutions support among major asset managers, some financial institutions, such as BNP Paribas Asset Management and CCLA, have reaffirmed their commitment to environmental and social issues, aiming to transition their portfolios with a focus on climate.
- The retreat of major asset managers like BlackRock and Vanguard from unconditional support for ESG resolutions can be attributed to factors like client-directed voting policies, regulatory changes, political backlash, and doubts about the effectiveness of shareholder resolutions.
- To ensure alignment with clients' stance on climate change, a coalition of asset owners is considering downgrading asset manager ratings, reassessing mandates, or selecting managers demonstrating greater commitment to tackling climate change, signaling a shift in investing trends based on environmental and social concerns.
