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Why do large asset managers vote against most climate-related shareholder proposals?

If the Big Three institutional investors vote "For" a climate proposal, odds are the company that received the proposal will take action to address the issues raised.

As investors prepare for the 2020 proxy voting season and try to assess the prospects for climate-related shareholder proposals (and decide how to vote), looking at data from last year’s proxy votes by asset managers can help. 

The 2019 data show that, for the first time, every asset manager we studied voted "For" at least some proposals. In addition, 39 percent of climate-related shareholder proposals we tracked were withdrawn by the filing investors in return for companies committing to take actions on issues raised in the proposals. This demonstrates companies’ willingness to respond positively to shareholder proposals. 

On the flip side, the 2019 data also reveal that some large asset managers continue to vote "Against" nearly all climate-related proposals, a pattern similar to previous years.

Climate risk goes mainstream

We release our annual analysis of asset manager vote tallies on climate-related shareholder proposals to encourage more investors to vote "For" these proposals because of the substantial business risks caused by climate change. We believe that companies can protect value — and indeed create value — by understanding climate risks and responding with appropriate action. Often, shareholder proposals help companies see these risks and opportunities.

Examples of climate risk have become disturbingly easy to recount. Consider just one from each of the last three years: In 2017, Hurricane Maria killed thousands of people in Puerto Rico and knocked out much of the territory’s electric grid for roughly a year. In 2018, the deadliest wildfires in California’s history killed more than 90 Californians and drove one of the largest electric utilities in the United States into bankruptcy. And in 2019, wildfires laid waste to portions of Australia larger than Vermont and New Hampshire combined, killing more than 30 people and an estimated 1 billion animals; the Insurance Council of Australia had received claims for up to $481 million by early January. Overall, global property losses from extreme weather reach into the hundreds of billions a year.

Index fund providers favor less public forms of engagement with companies, such as private dialogue. But why not engage in dialogue and vote for shareholder proposals?
In the World Economic Forum’s recent annual report, business leaders and policymakers identified the top five risks to the global economy as extreme weather, climate action failure, natural disasters, biodiversity loss and human-made environmental disasters. Meanwhile, the level of greenhouse gases in the atmosphere continues to rise and, as a result, the global average temperature is already roughly 1 degree Celsius higher than pre-industrial levels. Scientists say a rise beyond 1.5 degrees Celsius will unleash catastrophic climate change impacts. 

Investors, policymakers and consumers will continue to encourage companies to reduce emissions, and more extreme weather and rising seas will force them to harden or move their physical infrastructure and/or find new commodity supply chains.

As the CEO of BlackRock, Larry Fink, told corporate CEOs in January, "Climate change has become a defining factor in companies’ long-term prospects" and is "compelling investors to reassess core assumptions about modern finance." 

Since BlackRock is the world’s largest asset manager (with more than $7 trillion AUM), these are profoundly important statements and send a strong signal about managing climate risk.

The influence of 'Universal Owners'

Mutual fund companies and other asset managers have a fiduciary duty to their clients, of course, to try to protect their investments from material risks and maximize portfolio returns. 

The "Big Three" index fund providers (BlackRock, State Street and Vanguard) hold an average of more than 20 percent of each company in the S&P 500. In addition, the shares they own add up to about 25 percent of all shares voted in corporate elections, as institutional investors and other large asset managers are more likely to vote than individual investors. (Investors who fail to submit votes are not included in the formula used to count votes.)

As the table below on 2019 proxy votes by asset managers shows, two of the Big Three voted "Against" nearly 90 percent of climate-related shareholder proposals. The third, State Street, voted "For" only 19 percent. So, it is easy to see that if the largest index fund providers had voted "For" more climate-related proposals, the votes on these proposals would be far higher (and many would garner majority votes), but in 2019 only one climate-related resolution achieved a majority vote.

Ceres climate risk voting chart

While nearly all shareholder proposals are advisory (meaning companies are not forced to take action even if a proposal receives a majority vote), in practice most companies feel tremendous pressure to address the issues raised in proposals that receive votes above 50 percent. So, if the "Big Three" vote "For" a climate proposal, odds are that a majority vote will occur and the company that received the proposal will take action to address the issues raised.

But it's one of the great ironies of our time that index fund providers vote against such a large proportion of climate-related shareholder proposals.

Because index fund providers can’t sell shares of individual companies in an index, they lack the ability to manage risk through investment decisions. In this sense, they are the ultimate long-term investors. Year after year, they continue to hold stock in all the companies in the indexes their funds track, such as the S&P 500 or the Russell 2000. Index fund providers’ only way to manage risk within any particular fund is thus through shareholder engagement, and the easiest form of engagement is proxy voting. 

Which brings us to the key question: Because climate risk is pervasive, index fund providers want to reduce risks and shareholder proposals are a key tool to get companies to do so, why don’t more index fund providers vote "For" more climate-related proposals? 

Index fund providers have stated that they favor less public forms of engagement with companies, such as private dialogue. But why not engage in dialogue and vote for shareholder proposals? After all, if a majority vote would send a different message to management than a dialogue, doesn’t that call the dialogue into question? And if a large investor really wants the company to take action, and a vote "For" is most likely to make that happen, then time spent on the dialogue is unnecessary.

And even in cases where index fund providers might assume some companies (such as those in the oil and gas sector) could continue to secure short-term benefits without taking action on climate change, they should still want them to address the related risks.

Why? Because the large index fund providers are what is known as "universal owners." They tend to own nearly all the publicly traded companies in many countries due to the breadth of their indexes. In this sense, they own a large slice of the global economy, and what's bad for it is bad for them. Remember, they are trying to maximize portfolio-wide returns, not the returns of any single company. 

Companies benefit by embracing key climate solutions such as boosting energy efficiency and purchasing renewable energy. Both solutions are generally cheaper than new fossil fuel-based energy.

Numerous corporate commitments to reduce emissions in line with what scientists say is needed (such as the more than 800 made to date through the Science Based Targets initiative) demonstrate that companies are starting to move in the right direction on climate risks — and opportunities. In the 2019 shareholder resolutions we tracked, 11 out of 12 on the use of renewables and energy efficiency were withdrawn in response to company commitments.

The best approach to managing climate risk for index fund providers, in fact, is to foster an orderly transition to a net-zero emissions economy by encouraging their portfolio companies to harness the many cost-effective solutions for making that transition. By doing so, index fund providers would join large numbers of other institutional investors who use shareholder engagement to address climate risk.

For example, more than 450 global investors (with a combined $40 trillion AUM) have been engaging with the world’s largest corporate GHG emitters through the investor-led initiative Climate Action 100+ to reduce emissions and improve governance, often using shareholder resolutions as a tool of engagement. In January, BlackRock, a Ceres Investor Network member, joined the initiative, which Ceres helped found.  

The best approach to managing climate risk for index fund providers is to encourage an orderly transition to a net-zero emissions economy by their portfolio companies.
Some of the largest asset managers say they want companies to address climate risk (see their statements below), but also have cited various reasons not to vote for shareholder proposals. These include the preference for private dialogue mentioned above and also concerns about proposals they view as poorly written. Some others have preferred to wait several years before voting for a proposal while the engagement with the company matures and votes rise. 

BlackRock, for example, has relied heavily over the years on private dialogues rather than voting "For" climate related shareholder proposals. In 2020, BlackRock received a shareholder proposal requesting a review of its proxy voting processes relating to climate change. Investors including Mercy Investment Services and Boston Trust Walden recently withdrew the proposal in return for a commitment from BlackRock to continue dialogue, stating: "We are hopeful that BlackRock’s voting and engagements will be an effective catalyst stimulating positive company changes on climate. Clearly, investors and clients globally will be closely monitoring BlackRock’s proxy voting performance on climate change to ensure their statements are translated into action."

In January, the firm updated its proxy voting guidelines (PDF), stating, "We believe that climate presents significant investment risks and opportunities that may impact the long term financial sustainability of companies. ... We expect companies to convey their governance around this issue through their corporate disclosures aligned with TCFD and SASB." 

These changes are supported by Fink’s letter to CEOs in January stating: "We have a responsibility to engage with companies to understand if they are adequately disclosing and managing sustainability-related risks, and to hold them to account through proxy voting if they are not." 

Other asset managers have released similar statements. In a recent public letter to corporate board members, State Street Global Advisors CEO Cyrus Taraporevala stated: "Ultimately, we have a fiduciary responsibility to our clients to maximize the probability of attractive long-term returns — and will never hesitate to use our voice and vote to deliver better performance. This is why we are so focused on financially material ESG issues." 

But as the 2019 data show, the largest index fund providers continue to vote against most climate-related shareholder proposals.

We remain baffled by this Gordian Knot. Alexander the Great, you’ll recall, tried to untie the legendary Gordian Knot. When he failed, as everyone else had, it is said that he drew his sword and simply cleaved the knot asunder. Perhaps Fink's words will be used similarly to Alexander’s sword and index fund providers will begin to vote for many more climate-related shareholder proposals. The result would be reduced investment risk and reduced risk of catastrophic climate change. 

2019 insights and trends

What can we learn from the 2019 data and related trends that will help asset managers as they determine how to vote on 2020’s crop of shareholder proposals? As mentioned earlier, one important trend is the decline in the number of asset managers that didn’t vote "For" any climate-related proposals. 

While 12 asset managers failed to vote "For" any climate-related proposals in 2016, none did in 2019 — for the first year in our tracking. Voya was the sole firm that voted "For" none of the proposals in 2018; it then supported 12 percent in 2019. However, this still leaves Voya third from last in the 2019 ranking, as shown in the table above. 

BlackRock’s percentage of votes "For" has been rising since 2017. Specifically, it voted for zero in 2016, followed by 2 percent in 2017, then 10 percent in 2018 and 12 percent in 2019.

In addition, several asset managers that showed low levels of support in 2018 seem to have changed their perspective on climate-related resolutions over the year and increased their "For" votes significantly in 2019.

For instance, American Century funds voted "For" 56 percent of climate-related resolutions last year, up from 13 percent in 2018. Amundi Pioneer voted "For" 23 percent of the resolutions in 2019, up from 10 percent in 2018.

However, several metrics show a decline in support for the proposals in 2019. JPMorgan Chase supported only 4 percent of climate-related proposals in 2019, down from 17 percent in 2018. The giant bank has suffered heavy criticism for financing fossil fuel companies. In February, it committed $200 billion to financing climate solutions, announced it joined Climate Action 100+, and placed restrictions on investing and financing related to thermal coal. These commitments contributed to the decision by Boston Trust Walden to withdraw a 2020 shareholder proposal filed with JPMorgan Chase on climate-related proxy voting policies.

Surprisingly, 61 percent of asset managers studied voted for fewer climate-related proposals in 2019 than they did in 2018. This breaks the trend we had seen for several years of generally increasing support levels. In addition, in 2019, only 39 percent of asset managers voted "For" at least half the climate-related resolutions presented to them, down from 46 percent in 2018. Moreover, 14 asset managers voted for fewer than 20 percent of climate-related resolutions in 2019 compared to 11 in 2018.

One possible explanation for the decline in support was a reduction in 2019 in shareholder proposals requesting sustainability reports. Nine of these went to a vote in 2018 and only one in 2019. (In 2019, an amazing 16 out of 21 of these proposals were withdrawn by their filers in return for commitments by the companies to issue reports.) The average percentage of "For" votes on these resolutions in 2018 was 41.8 percent compared to an overall average vote on climate resolutions in 2018 of 29.6 percent. So, a reduction in these resolutions, which attract a lot of "For" votes, could help to explain a reduction in total votes "For" by some asset managers. 

As we enter the 2020 proxy voting season, it’s clearer than ever that the investors we work with view climate risk as serious and widespread, and understand the urgent need for solutions.
Another possible explanation for the decline in "For" votes by some asset managers is that more corporations are taking steps to address climate risk. One asset manager told Ceres that the firm voted for nearly all climate proposals in 2018 and then saw some portfolio companies taking action in 2019 to address climate risk, so it did not feel compelled to vote "For" as many in 2019.

As we enter the 2020 proxy voting season, it’s clearer than ever that the investors we work with view climate risk as serious and widespread, and understand the urgent need for solutions. They’ll continue to pursue all available approaches to address this global economic challenge, including private dialogues, other forms of engagement and climate-related shareholder proposals. It’s our hope that large asset managers, and especially the index fund providers, exercise their influence and vote "For" more of these proposals.


Proxy voting data was compiled for Ceres by Morningstar, using N-PX filings submitted to the Securities and Exchange Commission (SEC). For the study, 46 asset managers were selected by Morningstar — these are among the largest 46 asset managers operating in North America. As a result, no pure-play socially responsible investment (SRI) firms were included. These SRI firms tend to vote for all or nearly all climate-related resolutions we track each year.   

The analysis covers the 53 climate-related shareholder proposals that were put to a vote out of 141 total filed during the 2019 proxy season. Of the others, 56 resolutions were withdrawn in return for a commitment by the company — an outcome that represents the goal of filing shareholder proposals — with companies agreeing to take action to improve disclosure, reduce risk or seize opportunities. The remainder of the shareholder proposals did not go to a vote for various reasons including; being withdrawn for dialogue or for technical or strategic reasons; or the SEC allowing the company to omit the proposal from their proxy ballot.  

The average vote on the 53 proposals was 26.8 percent "For." Of the 53, 18 proposals focused on lobbying disclosure, eight related to greenhouse gas reduction goals, six concerned carbon asset risk or transition planning, five covered recycling / plastic packaging and the remainder covered six other climate-related topic areas. The actual shareholder proposals and the voting results for each can be viewed at

This article originally appeared on Ceres.

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