ESG Investing  

Asset managers failing to resolve ESG issues in investments

Asset managers failing to resolve ESG issues in investments
 

The asset management industry is failing to resolve the vast majority of social and environmental issue in the companies they are invested in, a charity has said.

Of 169 shareholder proposals selected by ShareAction, only 21 per cent of environmental and social resolutions received more than 50 per cent of shareholder support this year, it found.

Furthermore, the industry’s voting performance has not increased significantly since last year. Of the 51 asset managers assessed in both 2020 and 2021, the proportion of “yes” votes for social and environmental resolutions rose a mere 4 per cent.

Resolutions with a stronger focus on action or changing corporate behaviour struggled to achieve more than 30 per cent shareholder support.

For the report, called 'Voting Matters 2021', the charity looked at 169 shareholder resolutions in firms held by 65 asset managers. 

“Proxy voting is a core part of an asset manager's fiduciary duty, and a key way in which the sector can influence companies on social and environmental issues,” ShareAction said.

“Yet overall voting performance across the industry remains poor and stagnant.”

The charity also criticised asset managers for not exercising their voting rights, highlighting that seven assessed managers voted on fewer than 60 per cent of resolutions.

“Not voting sends a signal to these companies that their behaviour on environmental and social issues is not of interest to their shareholders,” the charity warned.

Recommendations

ShareAction’s study showed the six largest asset managers in the world had backed fewer shareholder proposals than recommended by proxy advisers ISS and Glass Lewis.

The charity recommends that asset managers take the following actions to improve:

  • Use the charity’s analysis to assess their performance relative to peers and to identify areas for improvement; 
  • Develop and strengthen their voting policies by explicitly committing to support shareholder 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 rationales in a manner that is timely and user-friendly;
  • Commit to voting at all AGMs, regardless of geography or the level of holdings;
  • Pre-declare voting intentions for particularly key ESG resolutions;
  • Consider filing shareholder resolutions at companies failing to make sufficient progress on ESG issues. 

The charity also recommended asset owners use the research to inform their selection and monitoring of asset managers, engage with asset managers when they fall short of expectations as well as to strengthen voting priorities and expectations.

sally.hickey@ft.com