Asset managers fail to solve ESG issues in investments
The asset management industry fails to solve the vast majority of social and environmental issues in the companies they invest in, a charity has said.
Of the 169 shareholder proposals selected by ShareAction, only 21% of environmental and social resolutions received more than 50% of shareholder support this year, he noted.
Additionally, the industry’s voting results have not increased significantly since last year. Of the 51 asset managers assessed in 2020 and 2021, the proportion of “yes” votes for social and environmental resolutions only increased by 4%.
Resolutions placing more emphasis on action or changing corporate behavior struggled to garner more than 30% shareholder support.
For the report, titled “Voting Matters 2021”, the association reviewed 169 shareholder resolutions in companies owned by 65 asset managers.
“Proxy voting is an essential part of an asset manager’s fiduciary duty and a key means by which the industry can influence companies on social and environmental issues,” ShareAction said.
“Yet the overall voting performance in the industry remains poor and stagnant.”
The association also criticized asset managers for not exercising their voting rights, pointing out that seven assessed managers voted on less than 60% of the resolutions.
“Not voting sends a signal to these companies that their behavior on environmental and social issues does not interest their shareholders,” warned the association.
The ShareAction study found that the world’s six largest asset managers backed fewer shareholder proposals than recommended by proxy advisers ISS and Glass Lewis.
The charity recommends that asset managers take the following steps to improve themselves:
- Use the charity’s analysis to assess its performance against its peers and identify areas for improvement;
- Develop and strengthen their voting policies by explicitly committing to support shareholders’ resolutions on environmental, social and governance (ESG) issues on a “comply or explain” basis;
- Improve transparency on proxy voting by publishing voting policies and voting rationale in a timely and user-friendly manner;
- Commit to voting at all AGMs, regardless of geography or ownership level;
- Pre-declare voting intentions for particularly key ESG resolutions;
- Consider filing shareholder resolutions in companies that are not making enough progress on ESG issues.
The charity also recommended that asset owners use research to inform their selection and monitoring of asset managers, engage with asset managers when they don’t meet expectations as well as to reinforce voting priorities and expectations.