BlackRock, Vanguard and State Street routinely ignore their proxy advisers’ recommendations and vote to block environmental and social action at companies, according to research that rebuts claims that big asset managers blindly follow voting advice.
The analysis by responsible investment charity ShareAction, on behalf of the Charities Responsible Investment Network, found that the world’s largest fund managers voted differently to their proxy advisers’ recommendations about three-quarters of the time on environmental, social and political lobbying proposals.
The findings challenge accusations that asset managers “robo-vote” or automatically follow the recommendations of proxy advisers, which provide investors with advice on how to vote on issues from executive pay to director re-elections at annual meetings.
The Securities and Exchange Commission has proposed new rules to reform the proxy advice industry after an influential lobbying campaign warned that proxy advisers wield too much power. A comment period on the proposals closed earlier this month, with the SEC expected to finalise the rules by the end of the second quarter.
“Corporate lobby groups have managed to paint proxy advisers with a bad brush,” said Isobel Mitchell, co-author of the ShareAction report, which looked at the voting recommendations of Institutional Shareholder Services and Glass Lewis, the two biggest proxy advisers.
“Our research shows asset owners should be concerned about their managers’ own practices and behaviour influencing their voting decisions, rather than an over-reliance on the recommendations of proxy advisers, as is often claimed by business lobbyists.”
Ms Mitchell questioned why many big investors, including traditional active managers such as JPMorgan Asset Management, were less likely to support environmental, social and political lobbying proposals than their proxy advisers.
The research found that 65 per cent of the big investors examined backed company management on environmental, social and political lobbying proposals more often than their proxy adviser, a finding that will raise questions about how seriously asset managers are taking sustainability.
Sarasin & Partners, CCLA, HSBC Global Asset Management and Aviva Investors were more likely than their proxy adviser to back environmental and social resolutions at annual meetings.
Rakhi Kumar, head of ESG investments and asset stewardship at State Street Global Advisors, said the $3.1tn asset manager took a “case-by-case approach” to voting on proposals related to sustainability topics. She added that it would consider issues such as the materiality of the topic and whether the adoption of the proposal would promote long-term shareholder value.
State Street said last month that it would start voting against boards of big companies that lagged behind on ESG issues.
BlackRock also announced that it would be “increasingly disposed to vote against management” that were not making sufficient progress on sustainability, as it unveiled a far-reaching plan to put ESG issues at the heart of its investment process last month.
According to the ShareAction report, ISS recommended that investors back 79 per cent of the environmental, social and lobbying resolutions examined, compared to 54 per cent of the time at Glass Lewis.
Gary Retelny, chief executive of ISS, said the company typically was supportive of ESG resolutions that asked for more disclosure from companies, believing it was important for shareholders to know what was going on at businesses.
“We are very big on long-term shareholder value. That is the lens through which we evaluate many of these things,” he said.
Courteney Keatinge, senior director of ESG research at Glass Lewis, said it looked at shareholder proposals on a case-by-case basis.
“We carefully scrutinise whether adoption of these proposals would result in any long-term material benefit or risk mitigation for shareholders and take into account factors including the company’s industry, size, operations, geography, and pertinent regulations and market norms.”