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CalPERS, PGGM, APG back resolution on climate change voting at T. Rowe Price

Big institutions get behind proposal from SRI firm Zevin

Major institutional investors including CalPERS and Dutch giants PGGM and APG backed a shareholder proposal about asset manager T. Rowe Price’s proxy voting on climate change, their voting records show.

The resolution, filed by SRI firm Zevin Asset Management, called for a report from the Baltimore-based firm that would make “an assessment of any incongruities” between its public statements on climate change and the “voting policies and practices of its subsidiaries”.

T. Rowe, which manages at $1.3trn, advised its shareholders to vote against the proposal because it “inappropriately connects the company’s general position and actions on climate change with the separate voting practices of our subsidiaries that act as investment advisers (Price Advisers)”.

It said the board does not have direct responsibility for proxy voting conducted by the Price Advisers on behalf of clients.

Zevin, in a letter to shareholders ahead of the AGM, said this argument “does not withstand scrutiny” and pointed to the SEC’s reasons for allowing the resolution onto the ballot in the first place.

The SEC had said: “In our view, the proposal is focused on possible differences between T. Rowe Price Group’s public statements and pledges regarding climate change and the voting policies and practices of its subsidiaries, including any subsidiaries which are investment advisers (“Price Advisers”) regarding climate change.”

In the event, the resolution got 14% support at the company’s annual meeting this week, with some heavy hitting institutions getting behind it.

PGGM, which manages €252bn of pension assets, for example, said it would vote in favour as it would “benefit shareholders by allowing them to assess the company's policies and proxy voting practices on climate change-related issues, as well as providing a better understanding of the company's policy positions on climate change”. Records show that the California Public Employees Retirement System and APG, the asset manager owned by civil service pension giant ABP, also supported it.

But some other major pension investors, including CalSTRS, Norges Bank Investment Management and the Ontario Teachers Pension Plan, did not support the Zevin resolution.

OTPP, on its voting database, said it was “not convinced” that support was necessary.

The Toronto-based investor said it had reviewed the proposal and the response from the company. “We recognize the complexity associated with voting on climate change issues and support the company's current approach to assess climate change proxy voting practices on a case-by-case basis, considering their fiduciary responsibilities to clients.

“We also note that votes cast are publicly available for scrutiny. As a result, we are not convinced that supporting this proposal at this time is necessary.”

Its neighbor the Canadian Pension Plan Investment Board (CPPIB) also voted against the Zevin resolution – though it was supported by British Columbia Investment Management Corporation (BCI), which noted: “We are supporting this shareholder proposal calling for additional assessment and reporting on the company's policies, practices and related implementation program.”

Some big investors also voted against or abstained on the re-election of chairman and CEO William Stromberg.

These included NBIM and PGGM, which explained: “The chairman's role on a board is to evaluate and review the performance of management; this role is obviously compromised when the chairman is also the CEO. PGGM therefore requires the roles of chairman and CEO to be separated.”

There was also institutional pushback against executive pay at T. Rowe, with PGGM voting against named executive pay with the comment: “The CEO equity pay mix includes a time-based portion.”

BCI, voting against pay, said the “program is structured in a way that does not sufficiently align pay with performance” and that it was “not in line with best practice”.

Pat Miguel Tomaino, Director of Socially Responsible Investing at Zevin told RI: “We’re pleased with that having re-filed the proposal after a hiatus and T. Rowe Price failing to improve on proxy voting related to climate change.” Similar proposals had been filed at T. Rowe going back several years.

In March, RI reported that Blackrock and JP Morgan Chase managed to dodge shareholder proposals on their poor ESG proxy voting records since making sustainability commitments such as signing up to Climate Action 100+.

It comes as T. Rowe this week released its second annual ESG Report, saying the rising risks associated with climate change would impact virtually its entire universe of portfolio holdings to varying degrees and that climate change “is being increasingly factored into analysts' evaluation of company fundamentals”.

Its process is supported by a proprietary system called Responsible Investing Indicator Model (RIIM) that assesses more than 14,000 corporate and sovereign entities.

ESG was its top engagement topic in 2019 with “environmental disclosure a feature of 38% of our ESG engagements”.

Turning to the effectiveness of proxy voting, the firm said one-on-one engagement is preferable to shareholder resolutions.

“We believe it is debatable whether many shareholder resolutions represent a meaningful solution to various ESG-related challenges.

“In almost every instance, shareholder proposals are non-binding votes that are opposed by the company's management and board.

“Based on the firm's experience, one-on-one engagement with companies produces better outcomes than shareholder resolutions. It's also important to note that out of 64,249 proposals that T. Rowe Price cast a vote on globally in 2019, only 0.5% were dedicated to environmental and social issues.”