US investment heavyweights JP Morgan, Northern Trust and Wellington have dramatically ramped up their support for climate proposals this year, according to a new report by campaign group ShareAction, which analysed the voting decisions of 60 of the world’s largest asset managers on 102 social and environmental shareholder resolutions.
Of the trio, Northern Trust supported the most, voting for 79% of climate-focused proposals this year, compared to 21% the year before. But JP Morgan, which supported just 7% of climate-related proposals in 2019, saw the greatest increase, backing over seven times more proposals this year, with 51% support.
Jennifer Wu, JP Morgan Asset Management’s Global Head of Sustainability, attributed the surge to “an increased focus on corporate engagement and ESG research, with climate risk being one of our global priorities for investment stewardship”.
Early this year, the investment arm of JP Morgan Chase became a member of influential shareholder engagement network Climate Action 100+ (CA100+). Investment behemoth Blackrock also joined the initiative this year, but only supported 11% of climate proposals this season.
Wellington Management upped its support for climate proposals six-fold this year, backing 61%, compared with 10% last year. Wendy Cromwell, Chair and Director of Sustainable Investment at the Boston-based asset manager told RI that this year it had “evolved” its approach “to also consider the spirit of shareholder proposals, not just the letter, and we generally supported those proposals that addressed material issues even when management had already been responsive to our engagement on the issue”.
Majority support was achieved for 15 out of 102 climate and social shareholder proposals this year, but ShareAction found that a further 17 would have passed the 50% threshold with the support from one or more of the so called ‘Big Three’, which includes BlackRock, Vanguard Group, State Street Global Advisors.
State Street, which manages close to $3.2trn on behalf of clients, was named the newest member of CA100+ yesterday. It supported 40% of climate resolutions this season.
Vanguard, the only ‘big three’ investor to remain outside of CA100+, supported just 15% of climate proposals this year.
ShareAction’s report also highlights “a disappointing trend” of asset managers justifying their refusal to support climate resolutions on the basis that they preferred to engage privately, or that the company was already ahead of its peers.
‘We evolved our approach to also consider the spirit of shareholder proposals, not just the letter, and we generally supported those proposals that addressed material issues even when management had already been responsive to our engagement on the issue’ – Wendy Cromwell, Wellington Management
European oil major Total is given as an example: ShareAction reports that eight asset managers cited Total’s positive engagement with CA100+ as a reason for voting against the investor-led resolution calling on the oil giant to set Paris-aligned emissions targets.
“Given the scale of the climate crisis, it is concerning that some investors shy away from voting on critical resolutions at high carbon companies on the basis of engaging with them privately,” said Jeanne Martin, Campaign Manager at ShareAction.
She added that, “regardless of the company’s progress compared to its peers, if its strategy remains inadequate, investors need to support resolutions pushing for greater ambition.”
European fund managers dominate the top spots in ShareAction’s rankings, with the 17 best performers all based in Europe. Impax Asset Management, Aviva Investors and PGGM Investments all supported more than 95% of the resolutions analysed.
On average, CA100+ investors had a better voting record than their non-CA100+ peers, supporting 69% of climate resolutions, compared with 39% for non-members.
Eight of the 12 resolutions filed by investors leading engagement with CA100+ companies related to corporate lobbying, an issue that has become increasingly prominent for investors.
Proposals seeking disclosure continued to dominate the 2020 proxy season, although ShareAction noted a “slight increase in action-oriented resolutions”.
The NGO also found that, despite the rhetoric on Covid-19 increasing the focus on the ‘S’ of ESG, there was no change in voting behaviour on human rights resolutions before and after the World Health Organisation declared the pandemic in March.
Catherine Howarth, CEO at ShareAction urged pension funds to “urgently challenge” asset managers “exposed as having a weak voting record” on the “gap between [their] rhetoric and action”.
“As responsible investment strategies surge in popularity, voting on shareholder resolutions is a key test of authenticity and commitment”, she said.