Manager Exits Put Proxy Voting in the Spotlight at Climate Action 100+

The first surprise of the 2024 proxy season didn’t happen at a shareholder meeting. Rather, the first quarter of the year saw five asset managers exit or reduce their participation in Climate Action 100+, a major initiative for big investors to engage with companies about decarbonization. Investors who signed on agreed to the goals and then tracked their progress.

Collusion Concerns Among Some Conservatives

But there is an ongoing push against all things ESG—environmental, social, and governance—in the United States. And to some Republican lawmakers, climate-focused collaboration by asset managers appears equivalent to the kind of collusion that breaches antitrust law.

Amid all this, Invesco, JPMorgan, Pimco, and State Street have all chosen to leave the decarbonization-focused engagement initiative entirely. Meanwhile, BlackRock has opted to significantly alter its involvement: exiting its group-level involvement and transferring its participation to its non-US business.

Do the accusations of collusion hold water?

Analysis of recent proxy-voting decisions suggests not. We examined the proxy-voting records of these five managers, alongside 35 other US and European managers and 20 public pension asset owners in the US and Canada. Our analysis covered 50 CA100+ signatories and 10 nonsignatories.

Here’s what we found.

Varying Success Levels for Climate Resolutions

Each year, CA100+ flags a number of resolutions for investors to consider when voting at company shareholder meetings. In 2023, the initiative flagged 20 shareholder resolutions at 15 companies. The chart below shows adjusted shareholder support for each resolution. (Adjusted support counts only the votes of a company’s independent shareholders.)

There was a relatively wide range of support for these proposals. Two of the resolutions featured on our list of well-supported key ESG resolutions with more than 40% adjusted support: a request at Berkshire Hathaway BRK.B for a report on climate transition risks and opportunities, and one at Paccar PCAR requesting transparency on climate-related lobbying activities.

Support for 18 other resolutions ranged from 16% to 36%. The most successful of these was a request at Exxon Mobil XOM for disclosures on methane emissions.

Signatories’ Proxy Votes Signal Independent Decision-Making

Proxy-voting records for the 20 flagged resolutions in 2023 suggest a wide range of voting approaches among CA100+ signatories, not collusion.

It will surprise nobody to discover that CA100+ signatories show higher support for the 20 flagged resolutions than nonsignatories. However, total support for these resolutions is relatively rare even among signatories.

As shown on the chart below, the 50 CA100+ signatories we reviewed (including the five firms that exited or amended their participation) supported an average 76% of the resolutions. Support by these 50 institutions ranged from as low as 10% up to 100%. On average, the asset owners we reviewed were stronger supporters of flagged resolutions than asset managers.

Focusing on the five exited/amended signatories, shown on the chart below, we see a similar wide range in voting support for the 20, stretching from BlackRock’s support for 10% of these resolutions up to fixed income-focused Pimco’s 95% support. Average support by the five is much lower than for the wider group of 50 signatories, at just 45%.

Notably, even nonsignatories saw merit in a significant number of the flagged resolutions. On average, the 10 nonsignatories we reviewed supported over a fourth (27%) of the 20 resolutions. The five asset managers in this group (Capital Group, Dimensional, Fidelity, T. Rowe Price, and Vanguard) showed average support of 11%, while five asset owners supported 43% of the proposals on average. The Teacher Retirement System of Texas was the only institution we reviewed that opposed all 20 resolutions.

The Trans-Atlantic Divide Remains Wide

Instead of evidence of collusion, we think our study reveals once again that US and European managers vote very differently on climate-related issues than they do on environmental and social matters more broadly.

The chart above shows that, on average, the 20 US managers we reviewed (including both CA100+ signatories and nonsignatories) supported 48% of the resolutions. For the 20 European managers we studied, the average is much higher at 85%.

The asset owner group sits in between, with 71% average support. For them, as for individual investors, it remains important to be clear on whether asset managers’ voting decisions are aligned with any specified sustainability priorities, like managing climate-related risks. If not, it may be time to investigate new options, whether that’s choosing new proxy-voting options or a new manager.