Paul Hodgson: BlackRock/Vanguard support two climate resolutions? Show me the money in 2018!

Is there really a sea-change in how big asset managers are voting?

Ceres and Fund Votes put out their research into climate change resolution voting in 2017 right before Christmas, with the headline: “Four Mutual Fund Giants Begin to Address Climate Change Risks in Proxy Votes: How About Your Funds?”

The research, written by Rob Berridge, says that the big news last year was that: “four of the top ten largest asset managers, together accounting for $12.8trn in assets under management, voted for a climate proposal for the first time ever.”

He’s right, it does have important implications, and it may presage a sea-change. But, it is just one or two resolutions supported… out of a total of 90 filed?
You get the same looking graph when, for example, As You Sow looks at who voted against Say on Pay resolutions: the same four big funds, BlackRock, Vanguard, Fidelity, and American Funds never voting against a CEO’s pay package, or maybe a couple. And, in that situation, we would be, and are, hammering them for being pay enablers.

We can’t have it both ways. Either a couple of votes for climate change and a couple of votes against Say on Pay is a poor record, or it’s not.
Yes, they’ve voted ‘yes’ on climate twice, but what does it really signify? As Berridge points out, it’s a start. There are still, says the research, five asset management firms that have still failed to vote for a single climate-related proposal: American Century, Cohen & Steers, Lord Abbett, Pioneer and Putnam.
Tim Smith, Walden Asset Management’s director of ESG shareowner engagement said: “While investors who are leaders on climate advocacy are appreciative of the important work BlackRock, Vanguard and others do supporting the TCFD [Task Force on Climate-related Financial Disclosures] and engaging companies by the hundreds on climate change, they also urge more proactive proxy voting. They note supporting only two climate resolutions out of 75 is hardly leadership.”
However, as Berridge notes, if their behaviour continues, “Higher votes, and even majority votes on climate-related proposals, are now much more likely because these four asset managers collectively own around 10%-15% of many companies’ shares.”
But that behaviour will only continue if “their clients and other investors should continue to urge these firms to speak out publicly and vote in support of other climate-related shareholder proposals where there is a strong business case”.And that pressure can come from direct engagement or through shareholder resolutions, such as the two that Walden filed and then withdrew at BlackRock and Vanguard last year. Similar resolutions, to review their climate change voting records, have also been filed at Bank of New York Mellon, Cohen & Steers and T. Rowe Price. Said Smith: “Companies with sub-standard voting records who are yet to move forward, like Cohen & Steers and BNY Mellon, have received resolutions for the 2018 proxy season.”
Smith was more positive: “We also note enthusiastically the strong leadership of State Street both in voting and climate advocacy, and the fact that Fidelity jumped into climate proxy voting in a visible and active way.” Similarly Berridge, who wrote in an email response: “BlackRock, for one, has done something that very few other giant asset managers have done, which is to discuss climate risk in several public, annual letters from CEO Larry Fink to companies.

“Let’s hope that, as their engagements with companies mature, they vote for many more resolutions.” Smith pointed to Vanguard’s open letter last year, in which it called climate risk “an example of a slowly developing and highly uncertain risk—the kind that tests the strength of a board’s oversight and risk governance”.
The letter called for “materially-driven, sector-specific disclosures” on climate issues and described these initiatives as “an economic imperative, not an ideological choice”. Sounds like a sea change to me.
But let’s have a shout out for the real heroes and heroines of climate change resolutions: Deutsche, at 100%.

Then Allianz, Nuveen, Wells Fargo (of all asset managers!), AllianceBernstein, Natixis, Principal and Legg Mason, all at 70% or more.
State Street and Schroders’ support, on the other hand, fell back compared to 2016, which, given State Street Global Adviors’s seemingly positive perspective on climate change disclosures, is somewhat disappointing and/or counterintuitive.
However, SSGA’s Stewardship Activity Report also reports a drop in support for climate change-related proposals, which appears to be due to an assessment of companies’ responsiveness and their engagement.