Increasing
hostility
from
the
political
arena
toward
the
consideration
of
environmental,
social,
and
governance
(ESG)
issues
in
investing
appears
to
be
translating
into
sharply-declining
support
for
ESG
shareholder
resolutions
from
the
biggest
US
fund
companies.
At
the
same
time,
European
asset
managers
have
maintained
a
high
level
of
support
for
ESG-related
shareholder
proposals.
As
a
result,
sustainability-focused
investors
are
facing
a
more
complicated
landscape,
and
possibly
greater
difficulty,
when
it
comes
to
aligning
their
investments
with
their
own
values.
In
Europe,
where
expectations
of
support
for
ESG
resolutions
are
higher,
and
several
of
the
US
firms
have
large
market
share,
these
concerns
are
growing
in
intensity.
While
large
index
fund
providers
have
begun
offering
voting
choice
options,
for
example,
they
come
with
added
complexity.
American
Century,
BlackRock,
Capital
Group
Back
Away
From
ESG
Support
Our
initial
analysis of
proxy-voting
results
for
key
ESG
resolutions
at
US
companies
in
September
indicated
a
sharp
drop
in
shareholder
support.
By
then,
the
two
largest
US
shareholders, Vanguard
and
BlackRock,
had
already
communicated
reduced
support
for
such
proposals.
The
two
firms
deemed
many
proposals,
even
some
with
strong
shareholder
backing,
to
be
inappropriately
prescriptive
or
redundant.
Yet, our
latest
research
paper indicates
that
the
decline
in
support
for
key
resolutions
wasn’t
limited
to
the
largest
index
managers.
Many
other
large
US
managers
also
reduced
their
backing
for
even
well-supported
proposals.
We
define
key
resolutions
as
shareholder
resolutions
on
environmental
and
social
topics
that
gain
at
least
40%
support
from
independent
shareholders.
(We
call
this adjusted
support.)
Analysing
key
resolutions
enables
us
to
compare
proposals
that
are
perceived
to
be
of
similar
quality
by
voting
shareholders.
Our
study
reviewed
the
voting
disclosures
of
35
large
asset
managers
over
the
last
three
proxy
years
(that
is,
years
ended
June
30,
which
are
commonly
used
for
proxy-voting
analysis).
Twenty
managers
are
based
in
the
United
States,
and
15
are
in
Europe.
Between
them,
they
represent
over
$19
trillion
(£14.9
trillion)
of
equity
fund
assets,
according
to
Morningstar
Direct.
Unsurprisingly,
the
decline
in
support
for
key
resolutions
by
the
20
US
managers
largely
matches
that
for
the
market
as
a
whole.
Ten
of
the
top
20
equity
managers
in
the
US
showed
low
or
very
low
support
for
key
resolutions
in
2023,
compared
with
just
five
based
on
the
firms’
three-year
voting
record.
These
10
managers
represent
four-fifths
of
the
equity
fund
assets
that
the
20
firms
manage.
Vanguard
and
T.
Rowe
Price
Show
Very
Low
Support
for
ESG
Votes
Vanguard,
T.
Rowe
Price,
Dimensional,
and
Dodge
&
Cox
had
the
lowest
absolute
level
of
support
in
2023.
However,
they
have
been
among
the
lowest
supporters
of
key
ESG
resolutions
for
several
years
running.
American
Century,
BlackRock,
Capital
Group,
Goldman
Sachs,
and
Janus
Henderson
exhibited
some
of
the
most
significant
declines
in
support
for
key
resolutions,
which
can
be
seen
on
the
exhibits
below
changing
from
green
on
the
first
exhibit
to
gray
on
the
second.
From
Europe,
Continued
Support
for
ESG
Resolutions
Fifteen
European
managers –
including
larger
houses
such
as
Amundi,
Fidelity
International,
DWS,
LGIM,
and
UBS –
are
also
shown
above.
In
contrast
to
their
US
peers,
all
15
of
the
European
managers
we
assessed
consistently
show
very
high
support
for
key
ESG
resolutions.
All
this
means
greater
complexity
for
sustainability-focused
investors
who
care
about
their
managers’
voting
decisions.
For
investors
in
funds
managed
by
US
firms,
the
peak
in
broad-based
support
for
ESG
proposals
reached
two
years
ago
has
been
swiftly
reversed.
Also,
even
these
firms’
sustainable
funds
often
just vote
the
standard
house
policy,
which
these
days
often
means
relatively
low
support
for
environmental
and
social
proposals.
ESG
Investors
Face
More-Complicated
Voting
Outlook
As
a
result,
sustainability-focused
investors
are
increasingly
questioning
whether
their
managers’
voting
policies
are
well-aligned
with
their
own
environmental
and
social
objectives.
In
Europe,
where
expectations
of
proxy-voting
support
are
higher
and
where
several
of
the
U.S.
firms
have
large
market
share,
those
questions
are
being
asked
with
greater
intensity.
The
large
index
firms
have
begun
offering proxy-voting
choice
options to
those
concerned
about
such
misalignment.
But
with
up
to
14
policies
currently
on
offer
to
institutional
investors,
the
choice
certainly
comes
with
added
complexity.
We
believe
current
trends
in
support
for
ESG
resolutions
won’t
change
much
in
the
coming
proxy
season.
So,
sustainability-minded
investors
will
continue
to
question
whether
their
objectives
are
well-aligned
with
managers
who
are
reducing
their
support
for
key
ESG
resolutions.
There
may
be
some
big
decisions
for
them
to
make
in
2024.
Data
as
of January
2
2024.
Source:
Morningstar
proxy-voting
database,
asset
managers’
stewardship
disclosures,
SEC
filings. Note:
charts
show
data
for
proxy
years
ended
June
30.
Averages
of
US
and
European
managers
are
the
equal-weighted
arithmetic
mean
for
each
period
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