BlackRock, Vanguard, Fidelity Investments and State Street Global Advisors slashed their support for sustainability-related shareholder resolutions during last year’s annual voting season, according to research released today by ShareAction.
The London-based non-profit found that in 2022, on average, the world’s four largest asset managers backed 20% of the 252 resolutions analysed, compared with 32% in 2021. The drop comes despite a surge in sustainable finance pledges and activities by financial institutions globally over the same period.
BlackRock was found to have reduced its support for environmental resolutions at energy companies from 72% in 2021 to 16% last year.
While ShareAction suggested that the trend might be driven by an “unwillingness from some investors to challenge energy companies given record profits following the war in Ukraine, which resulted in greater dividends and buybacks for shareholders,” a BlackRock spokesperson told IPE that the most common reason for not supporting environmental and social resolutions was “because the company had substantially implemented or was already making notable progress on the issue being addressed”.
Last summer, BlackRock’s investment stewardship team published a report stating that it had supported 21% (207 of 995) of shareholder proposals, compared with 35% in 2021. On environmental and social topics, it supported 22% of resolutions globally – 4% lower than the market average.
A recent loosening of the US Securities and Exchange Commission’s rules on filing resolutions had, the report said, contributed to a 133% increase in environmental and social shareholder proposals in the country last year.
“We viewed many of these shareholder proposals as overly prescriptive, enabled by revised SEC guidance,” BlackRock noted.
ShareAction suggested that a shift in the type of requests being made in shareholder resolutions could be another driver of the slowdown in support. Many submissions now ask firms to align their business practices with climate and sustainability objectives, rather than simply disclosing more ESG data.
The study also highlighted the possible influence of the ‘ESG backlash’ in the US, which has seen investors face pressure from rule-makers – especially in Republican states – over whether their sustainable finance activities hurt the US economy or impose ‘woke’ values on financial markets.
Representatives from BlackRock and State Street were recently questioned at a Texas Senate Committee hearing over concerns in the oil-dependent state that they could be coercing companies into addressing climate change for ideological reasons.
Much of the grilling focused on their involvement in collaborative shareholder network Climate Action 100+, which some politicians allege is mobilising investors to influence entities in ways that contravene competition law.
Committee chair Bryan Hughes cited media reports that BlackRock voted for “about 10% of climate-related shareholders resolutions” in 2018 and 2019.
“Would it surprise you though that the same records show that in 2020, after joining Climate Action 100+, Blackrock voted for over 50% of all climate-related resolutions?” he asked.
BlackRock’s head of external affairs, Dalia Blass, responded by assuring Hughes that “over 90% of the time, we support management”.
“We do not believe in telling management what to do,” she said. “We look to management to help us understand their business, their material risks and how they’re managing those risks. But […] it’s the rare case actually are not supportive of management.”
Vanguard echoed BlackRock’s argument that there was a boom in “overly prescriptive” resolutions in 2022.
“After thorough assessment of individual social or environmental-related shareholder proposals, we determined that many were overly prescriptive in dictating company strategy or operations, and/or lacked a clear link to material risks and shareholder value at the company in question,” a spokesperson said by email.
Fidelity Investments and State Street had not responded to requests for comment at the time of publication.