US and European investment giants diverge on corporate climate votes

Big European asset managers – including Amundi, Legal & General Investment Management and BNP Paribas Asset Management – have dramatically ramped up their opposition to corporate-sponsored Say on Climate (SoC) votes in 2022 compared with US peers, a study by London-based shareholder advisory SquareWell Partners has revealed. 

SoC votes are the brainchild of Sir Chris Hohn and his UK hedge fund, The Children’s Investment Fund (TCI), which launched an initiative in 2020 to push companies to offer shareholders an annual advisory vote on their climate plans.  

Since then, many votes dubbed SoC have deviated from the strict format outlined by TCI, and have taken place less frequently than envisioned by the initiative.  

In an assessment of the voting of the 25 largest investment managers, BNP Paribas Asset Management was found to have opposed the greatest proportion of SoC votes, supporting just 22 percent of the sample assessed in 2022. This compared with 72 percent support for such votes the year before.  

The biggest shift was at Amundi, Europe’s largest asset manager, where support for corporate-led climate proposals more than halved, falling from 95.5 percent in 2021 to 40 percent last year.  

By contrast, US investment giants Capital Group and Fidelity supported 100 percent of the climate votes assessed. BlackRock, Nuveen Asset Management and Goldman Sachs Asset Management were close behind with 97.5, 97.4 and 96.6 percent support, respectively.  

The only US firm in the top five opposers of corporate climate votes is Franklin Templeton Investments, which supported 48.8 percent of votes in 2022, down from 89.5 percent the previous year.  

In January 2022, Franklin Templeton hired Anne Simpson from CalPERS as its global head of sustainability. During her time at the Californian pension fund giant, Simpson was instrumental in the creation of investor engagement initiative Climate Action 100+. 

She has also previously voiced strong concerns about SoC votes, warning that they risked repeating the mistakes made by Say on Pay proposals, which were often seen as rubber-stamping the status quo.  

This argument was echoed by the Principles for Responsible Investment (PRI) in February, when the investor body warned that advisory SoC votes risked becoming “an ineffective compliance mechanism” if companies put forward plans that do not align with global climate goals.

PRI added that this is a significant risk “because management proposals almost always obtain majority support from shareholders”. 

Average support for SoC votes dropped slightly from 93 percent in 2021 to 86 percent last year, SquareWell reported.

In October, an update to the CA100+ corporate benchmark, which assesses the transition efforts of the world’s largest emitters – including many that have put forward SoC votes – found that high-level commitments are still not being matched by credible transition plans in most instances.  

Only 10 percent of focus firms, for instance, were found to have set short-term targets – up to 2025 – that are aligned with a 1.5C scenario “and cover all material emissions”.

Investor pushback 

Six corporate climate votes did see more than 20 percent shareholder dissent, the SquareWell study found, with Aussie oil and gas giant Woodside suffering the biggest revolt of 48 percent.

In Europe, the largest pushback was against Swiss miner Glencore (23.7 percent of shareholders). Last week, it was revealed that big institutional investors co-filed a climate proposal at Glencore, pushing it to disclose how its thermal coal production aligns with the Paris climate agreement.    

According to SquareWell’s analysis, Abrdn and T Rowe Price were among the institutional investors to support Woodside’s climate proposal.  

Interestingly, SquareWell reported that 2022 witnessed a four-fold increase in the number of companies voluntarily adopting the SoC vote without shareholder intervention. Of the 46 management-sponsored SoC proposals put forward in 2022, 29 were adopted voluntarily, compared with seven out of a total of 22 the previous year.   

Another noteworthy finding was that the “discrepancy” between the recommendations given by influential proxy adviser ISS on SoC votes in its benchmark advice and its “socially responsible investment” (SRI) equivalent increased by 33 percentage points from 13.6 percent in 2021 to 46.3 percent in 2022, despite both set of recommendations using the same SoC policies. 

ISS’s SRI recommendations backed SoC votes in 39 percent of cases in 2022, whereas its benchmark advice backed them in 86 percent of cases.

When asked about this “discrepancy”, a spokesperson for ISS told Responsible Investor: “ISS’s clients are not uniform in their views, and so we offer numerous and diverse voting policy options to ensure their different needs and values are reflected through the application of policies of their choosing.” 

A spokesperson for BlackRock directed RI to document on its website on SoC votes, which state: “We have observed that investors, including BlackRock, are increasingly inclined to support the management proposal, as the company is demonstrating commitment to act by setting out their business plan for how they intend to deliver long-term financial performance through the energy transition.”

Nuveen, Fidelity and Capital Group had not commented at the time of publication. A spokesperson for Goldman Sachs IM declined to comment.