From zero to 93 percent: How the world’s largest asset managers support climate change proposals

A new report on the voting practices and engagement approach of the world’s 30 largest asset managers around climate change finds that although support for proposals on the issue varies hugely, ‘investors are increasingly becoming transparent on climate change’.

Just one of the 30 asset managers in the list supported no shareholder proposals on climate change (researchers looked at proposals that came to a vote between 2018 and 2020), according to SquareWell Partners’ research, with support then rising from 3 percent at the next lowest level up to 93 percent at BNP Paribas Asset Management.

Shareholder proposals have a low success rate, says SquareWell, ‘but that is expected to change in the near term.’

Of the 162 shareholder proposals filed over the past three years, it notes that only 15 were approved but adds that BlackRock, the largest asset manager, has said it will be more supportive of climate-related shareholder proposals in 2021. In the research period, BlackRock supported just 11 percent of shareholder proposals on climate change.

Regionally, SquareWell finds that ‘European asset managers are clearly more supportive of climate-related shareholder proposals.’

The report, titled ‘The changing climate on investor behavior’, is published by SquareWell Partners today to mark Earth Day and draws on its annual survey of the world’s largest asset managers.

SquareWell says its review of voting and investment policies and engagement activity around climate change ‘confirms that efforts to combat climate change by investors are now no longer as fragmented, with clear expectations from companies to contribute to a transition to a net-zero economy by 2050.’ The advisory firm adds that it ‘believes there is no other topic where investors are as co-ordinated and consistent in their demands from companies.’

Researchers looked at four 'broad actions' investors can take to enact change at portfolio companies and/or to meet their investment objectives:

• Voting
• Engagement
• Divestment
• Initiation/support of climate-related activism.

The report finds that many of the top 30 asset managers have started incorporating the management and disclosure of climate change risks when evaluating proposals such as director elections, annual report & accounts and executive pay. Half of the group now incorporates sustainability considerations – including climate change – when evaluating executive pay frameworks, 13 of the asset managers incorporate climate change concerns when voting on director nominations and four have incorporated climate change considerations into their evaluation of financial statements within their voting policy.

All 30 engage on climate change, according to the research, with seven of the asset managers disclosing a policy on divestment from companies that negatively contribute to climate change. ‘Divestment is becoming an increasingly important strategy for investors to encourage companies to act, though the effectiveness of such strategy is debated and is often considered as a last resort option for investors,’ notes SquareWell.

Anna Hirai, co-head of ESG research at SquareWell, says the research threw up some surprises. ‘Although I suspected that financial companies would be one of the main targets for climate-related shareholder proposals, I was surprised to see that a proposal category – ‘report on financing activities in view of climate change’ – received the least support from both ISS and Glass Lewis,’ she says.  

Support from retail investors was another interesting finding, adds Hirai: ‘While the average support for these proposals was relatively low – at 20 percent compared with other proposal types – it is interesting to note the proponents for two proposals that received more than 50 percent support were retail shareholders and/or advocacy firms.

‘We do see institutional investors gearing up on their engagement and voting practices regarding climate change overall, but it shows an increased awareness and willingness to act on climate change among retail shareholders.’

SquareWell’s report includes a tear-out sheet that it says companies can use to get a better handle on what risks investors might be looking at. ‘Companies can use this as a checklist to understand where investors may see a potential weakness, whether that is climate governance or greenhouse gas reduction targets,’ says Hirai. ‘We also see a say-on-climate campaign, initiated by The Children’s Investment Fund (TCI), gaining momentum since late last year so it may be advisable for companies to start thinking of their position on this subject.’