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T. Rowe Price urged to be consistent on ESG policy over climate change voting

Zevin leads shareholder resolution

Zevin Asset Management is promoting a shareholder resolution requesting Nasdaq-listed peer T. Rowe Price to review its climate change-related proxy voting policies and practices, which are seen by Zevin as incongruent with T. Rowe’s ESG investing approach and as an overlooked key risk.
Ahead of T. Rowe’s AGM, scheduled for April 26, Zevin’s resolution takes issue with the low voting record of the asset manager for climate change-related proposals – which Zevin said is at odds with the company’s own ESG investment policy and its commitments as signatory to the Principles for Responsible Investment.
Using data from advocacy group Ceres, Zevin highlighted that in 2016, T. Rowe mutual funds supported only 12% of “common sense” climate change proposals; much lower than peers such as Wells Fargo (72%), Northern Trust (64%), Morgan Stanley (57%) and State Street (46%).
T. Rowe, however, has recommended shareholders to vote against Zevin’s resolution, putting forward two arguments: Firstly, that T. Rowe differentiates between the parent company and its subsidiaries, calling them ‘Price Group’ and ‘Price Advisers’, respectively. It argues that the Price Group’s board of directors doesn’t have direct responsibility for proxy voting, and defers to the Price Advisers on these matters. T. Rowe considers it inappropriate that the Price Group oversees its subsidiaries’ proxy voting, as it would conflict with their fiduciary duty, it claims.
According to T. Rowe, its subsidiaries “vote shares in portfolio companies solely in the best interest of their clients, taking into account factors relevant to an investor”.
Secondly, T. Rowe maintains that the proxy voting records of its subsidiaries on climate change resolutions “clearly reflect an analytical, case-by-case approach that is consistent with their proxy voting policies and fiduciary duties”. It adds that no benefit would be realised by conducting the requested review to determine whether the individual proxy voting decisions of its subsidiaries “were consistent with any statement of Price Group regarding climate change”.
These arguments have been challenged by Sonia Kowal, President of Zevin, who told RI that “it’s just anarchy” if T. Rowe’s mutual fund boards are making decisions that do not correspond to the parent company’s ESG policy.She described as “hypocritical” the position of T. Rowe, given its public public stance as a committed ESG investor and member of the PRI.
“We are just asking for a central review of the climate change voting practices because we think there are some deficiencies – we are not asking necessarily to change them, it’s about drawing attention to it,” she said.
Zevin filed a similar resolution at last year’s AGM, which gathered just 8.5% of the vote. Kowal hopes to improve that result as the issue of climate change becomes increasingly part of mainstream investment considerations.
Kowal also hopes to get the support of shareholders who are PRI signatories. However, she admits the resolution faces a “political problem” within the industry: “Asset managers don’t want to cause waves voting against their own peers. They are all part and parcel of the same thing.”
Asked about this resolution, Fiona Reynolds, PRI Managing Director, said her organisation does not tell signatories how to vote.
She added: “However, we are disappointed when climate resolutions do not win enough support from our signatory base. Asset owners need to have oversight of their managers’ voting and engagement records.”
Among a sample of T. Rowe’s shareholders contacted by RI, the majority said they don’t disclose voting intentions ahead of the AGM. Those include Grantham, Mayo, Van Otterloo & Co., UBS and Norges Bank Investment Management.
Notably, Norges voted against Zevin’s resolution last year and a spokesperson declined to comment, saying it “by policy [does] not comment on single companies or investments”.
Only a spokesperson for Generation Investment Management commented briefly about the proposal, saying: “We vote our proxies based on the specifics of each resolution, but we are positively disposed towards this kind of disclosure providing it is practicable for the company to execute.”
Proxy advisory firms ISS and Glass Lewis, told RI that they won’t release their reports until two or three weeks before the AGM.