After a proxy voting season which saw a surge in shareholder resolutions, a new study shows asset managers have been making their policies clearer about which environmental and social problems they will support.
A paper on asset managers’ focus on environmental and social themes in proxy voting published by Morningstar Manager Research today also revealed that US index giants BlackRock and Vanguard have a lower level of environmental and social focus than do major European managers such as Allianz Global Investors and BNP Paribas Asset Management.
The authors of the study, which evaluated 25 asset managers’ approaches to ESG themes, said in a summary of their findings: “Asset managers are adding more clarity to their policies on the features of E&S (environmental and social) proposals that they will and will not support,” adding that this could help investors make informed choices about manager selection.
The research firm said the number of shareholder resolutions on E&S themes had grown rapidly in the most recent proxy year, ending on 30 June, as had the number of such resolutions with significant shareholder support.
The number of E&S shareholder resolutions in the US that were opposed by company boards increased to over 250 this year from 145 in the 2021 proxy year, the firm said.
“Many asset managers have responded to this trend by providing more detailed and specific policies on what E&S proposals they would support.
”This leads to more predictable voting outcomes for asset managers, which in turn can help investors make informed choices about which managers’ active ownership approach best reflects their own E&S priorities,” Morningstar said.
The study analysed managers by grouping them based on their level of focus on E&S themes – ranking the firms individually from very high to low.
Nine of the 13 European asset managers include were judged to have a high or very high E&S focus in their proxy voting policies – meaning they tended to include detailed and specific policies on several aspects of climate policy – while 11 out of the 12 US asset managers studied had a medium or low focus, according to Morningstar’s assessment.
Allianz GI, BNP Paribas, Fidelity International, and Legal & General Investment Management had the highest level of focus on E&S issues in their proxy voting policies in the study, while the “big three” index managers – BlackRock, State Street Global Advisors and Vanguard – all had a medium E&S focus, as defined in the research firm’s categorisation.
Managing $9.6trn (€9.6trn) and $8.5trn, respectively, BlackRock and Vanguard are the largest asset manager in the world by some distance, according to figures from the Sovereign Wealth Fund Institute.
Morningstar said this “apparent transatlantic divide” could be attributed to several factors, including market culture, regulation and stewardship codes.
“US asset managers have long taken a strict shareholder value approach to their dealings with company boards and management in part due to the narrow definition of fiduciary duty in the US, which requires that managers focus on maximizing financial returns for the client,” it said.
This contrasted, the firm said, with the European view that fiduciary responsibility encompassed a broader range of issues, including the impact of companies on the environment and society at large.
Separately, research conducted by MSCI ESG Research also found that concentration of ownership of corporations also increased in the last five years among MSCI ACWI Index constituents that lacked a controlling shareholder. Among widely held and Principal shareholder companies globally, BlackRock held 5% or more of 638 index constituents, and Vanguard held 5% or more of 424 index constituents.
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