Fund manager progress in voting on ESG issues is slowing
A new report on voting activity by third-party fund managers suggests that the pace of progress has been slowing — coming at a time when some asset owners seem to be de-emphasising their ESG commitments, these trends have been a cause for concern.
According to ShareAction’s report on asset manager voting trends, the world’s largest asset managers backed fewer shareholder resolutions on environmental and social issues in 2022 than they did in 2021.
“Asset managers across the board are hesitant to back action-oriented resolutions, which would have the most transformative impact on environmental and social issues,” said the report.
The report ranked 68 global asset managers according to how many shareholder-sponsored resolutions each manager voted for, as a percentage of the total number of resolutions the manager was able to vote on.
Significantly, the report said an additional 49 (out of 252) shareholder resolutions would have received majority support if BlackRock, Vanguard and State Street Global Advisors had voted in favour of them.
There have been wide variations in regional voting activity. “Voting performance has been stagnant in the US and the UK compared to 2021, while European asset managers have shown a large improvement,” noted ShareAction.
ACGA
Jane Moir at Asian Corporate Governance Association says these regional variations extend to Asia.
A DIFFERENT DEVELOPMENT
“What we see in Asia in terms of shareholder proposals is somewhat of a different story,” she told AsianInvestor.
“The region by no means sees the same scale of activity compared to western markets, and this is a reflection of the logistical and regulatory hurdles in bringing them. These include concerns over concert party rules, particularly in markets such as Japan.”
However, ACGA is also seeing more resolutions in Japan and Korea, and more investor support for them, said Moir.
“The JPower resolution last year gained a respectful vote and more recently, the recent proposals at Fujitec suggests investors are more willing to back proposals which can have a significant outcome.”
BNP Paribas Asset Management is one of the asset managers who have been rated highly in the report, ranking 3rd on support of environmental and sustainability shareholder proposals, in particular.
“We don’t agree that momentum on stewardship has slowed,” the firm’s head of stewardship for Asia Pacific, Jane Ho, told AsianInvestor.
“On the contrary, I would argue that there is a noticeable step up in stewardship activities in Asia.”
“We and other asset managers globally are stepping up activities on this front, focusing not only on voting, but also engagement and public policy advocacy. This is reflected not only in the growth of team members dedicated to stewardship, but also in terms of activity level with regards to voting and collaborative engagement initiatives."
FOLLOWING UP
ShareAction said that asset owners should ask their external fund managers to disclose data on follow-up engagement for all instances where they have opposed management on ESG issues.
"They should also consider engaging collaboratively with other asset owners who share their asset manager."
BNP Paribas AM's Ho added that asset owners are indeed increasingly focused on accountability and action with external managers. Many also publish their own stewardship or voting reports.
BNP Paribas AM
"We see this reflected also in the selection process of asset owners, with the increase in RFP questions on ESG and stewardship to the due diligence of these activities. Clients are looking for increased reporting and examples," said Ho.
She is also encouraged by the greater collaboration between asset owners in Asia on governance and stewardship.
"Asset owners are increasingly active members of collaborative initiatives such as the Asia Investor Group on Climate Change (AIGCC) and Climate Action 100+, working alongside industry peers on stewardship."
As reported, many of the largest asset owners in Asia Pacific have made a concerted effort to tighten up their voting activities.
Malaysia’s EPF has started disclosing its voting decisions after shareholder meetings. In Singapore, GIC’s dialogue with companies is focused on strengthening board independence and diversity.
Anne-Maree O’Connor, head of responsible investment at NZ Super, said the aim of making their voting public is to demonstrate how the fund’s votes reflect “the essential elements of good governance: transparency, board alignment with shareholder interests, long-term strategy, appropriate remuneration, business ethics, and shareholder rights.”