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New report from NGO ShareAction finds sharp fall in help for ESG proxy votes with a slip to three% in 2023.
Asset managers persistently fail to help shareholder resolutions asking main banks and insurers to stipulate a plan for phasing out fossil gasoline, ShareAction has revealed in its new Voting Issues report.
In response to the report, 69 of the world’s largest asset managers – who handle wealth roughly equal to 60% of the worldwide economic system – voted on a complete 257 shareholder resolutions targeted on social and environmental points final yr. Nevertheless, solely eight of them have been handed.
The findings additionally revealed an “enduring sample of poor help” for local weather resolutions concerning fossil gasoline financing. Such resolutions averaged 22% of help in 2022, however dropped to 16% solely final yr – the bottom common help throughout the report. The resolutions have been primarily action-orientated and largely involved main banks and insurers, asking them to place ahead a plan for phasing out fossil gasoline growth financing and fossil gasoline tasks underwriting.
The rationale given by many asset managers for not supporting extra financing-related local weather resolutions was that they have been too prescriptive and interfered in, or distracted from, firm technique set by administration. But, most of those resolutions merely requested firms to ascertain plans to section out fossil fuels financing, according to the Paris Settlement and worldwide scientific consensus round limiting international temperature rises to 1.5C” – with out dictating the small print of their transition plans.
US / Europe break up
The report revealed a pointy lower in help for ESG shareholder resolutions, which fell from from 21% in 2021 to solely 3% in 2023. The 4 largest asset managers of the 69 included within the examine majorly contributed to the drop, in line with ShareAction, having displayed a big and constant decline in help.
BlackRock, as an example, solely supported 8% of the 257 environmental and social shareholder resolutions analysed by ShareAction in 2023, in comparison with 40% in 2021. State Avenue International Advisors, for its half, supported 23% of them, whereas Constancy Investments supported 16%, and Vanguard 3% solely.
ShareAction additionally reported that the world’s largest asset managers, that are all based mostly within the US, have an outsized affect on company behaviour by way of their possession of the world’s largest firms. Collectively, they handle a mixed US$23 trillion in property – a determine roughly equal to the US’ GDP.
Throughout the pond, European asset managers appear way more supportive of such resolutions total, having voted in favour of 88% ESG-related shareholder proposals in 2023. All European international locations have been on an upward pattern final yr – except the UK, the place asset managers’ help hovered round 64% on common.
For ShareAction, this is a sign that EU regulation such because the EU Shareholder Rights Directive, which requires managers to report on their shareholder engagement coverage, have had a constructive influence.
A new report from Morningstar evidenced an identical hole between the US and Europe, having discovered a median help of fifty% for ESG resolutions amongst 20 US asset managers within the US, in comparison with a skyrocketing 98% amongst 15 European counterparts.
Morningstar stated it didn’t count on that pattern to vary subsequent yr, including that sustainability-minded buyers worldwide would possible proceed to query whether or not their targets are aligned with US managers’ shrinking help for ESG resolutions.
In its 2024 outlook for ESG, Moody’s additionally warned in opposition to a “substantial threat for additional polarisation round ESG-related points” within the context of the various nationwide elections attributable to happen in main economies the world over this yr.
Biodiversity and human rights neglect
One other key discovering in ShareAction’s report was that asset managers have continued to ignore significantly urgent social and environmental points.
As a living proof, biodiversity was extremely uncared for final yr, with solely two resolutions having addressing biodiversity loss immediately by way of the subjects of sustainable supplies procurement and deforestation. An extra eight resolutions on plastic use and air pollution talked about the threats posed to wildlife or ecosystems of their rationale.
As well as, asset managers have continued to speculate on this planet’s largest weapons firms and to vote in opposition to human rights proposals.
“Ongoing conflicts in Ukraine and Palestine have resulted in surging share costs for weapons firms,” the report learn. “Eleven asset managers that are benefiting from these conflicts by way of continued funding voted in opposition to proposals asking firms to report on their human rights influence.”
These included resolutions filed at Common Dynamics and Lockheed Martin asking them to provide a report assessing the human rights impacts of their operations, and one other filed at Northrop Grumman to evaluate the alignment of its political lobbying actions with its human rights coverage.
All three firms have skilled rises of their inventory costs following the newest upsurge of violence in Israel and Palestine. “Common Dynamics and Lockheed Martin weaponry has been linked to warfare crimes and different violations of worldwide regulation dedicated by Saudi Arabia in Yemen – together with a 2018 faculty bus bombing – and by Israel in Palestine,” the report learn.
On a constructive notice, asset administration agency EFG was ranked primary on help for ESG-related shareholder proposals, adopted by Netherlands-based Achmea Funding Administration and French group Amundi. In distinction, US-based companies Dimensional Fund Advisors, Goldman Sachs Asset Administration and Vanguard ranked as the underside three.
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